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Feb 15, 2019

Aphria committee urges changes in governance amid LATAM review

Aphria committee's Latin American findings 'just enough' to lift shares


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Aphria Inc. (APHA.TO) said Friday that a review by a special committee has concluded that the Canadian cannabis producer’s acquisition of Latin American assets was within an “acceptable range” compared with similar acquisitions by competitors.

However, the committee also identified certain conflicts in the boardroom that weren't properly disclosed. 

“Based on further information available to the special committee, it appears that certain of the non-independent directors of the company had conflicting interests in the acquisition that were not fully disclosed to the board,” Aphria said in a release Friday.   

As a result, the special committee provided recommendations for the company including reviewing board composition, establishing a formal process for strategic transactions, and adopting a best practices to manage possible conflicts of interest.

"The board and I are grateful for the special committee's diligence and independence in undertaking its review," said Irwin Simon, Aphria's independent board chair, in a release. "The constructive conclusion to this long process has strengthened the company.”

Leamington, Ont.-based Aphria said its special committee was advised by Lenczner Slaght Royce Smith Griffin LLP, Deloitte LLP and independent financial advisors Duff & Phelps Canada Limited.

The review comes following a report released in December by short-sellers Hindenburg Research and Quintessential Capital Management, which accused Aphria of paying inflated prices for Latin American assets. 

Hindenburg Research Founder Nathan Anderson said in an email to BNN Bloomberg he applauds Aphria’s independent committee for taking his report’s findings “seriously and for making significant changes to the company’s board and governance policies.”

“The review largely corroborated our findings that acquisition prices were high and that multiple insiders had undisclosed conflicts of interest. We hope the company can turn a new leaf going forward," he said.

Quintessential issued the same statement. 

Aphria also announced John Cervini will step down from its board next month, while Simon will become the company’s interim CEO after Vic Neufeld retires on March 1.

Neufeld declined BNN Bloomberg's request for comment. 

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.


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