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Couche-Tard makes strategic cannabis move with large investment in Fire & Flower

Alberta cannabis retailer Fire & Flower announced on Tuesday their plans to open a shop in the Byward Market.
Alberta cannabis retailer Fire & Flower announced on Tuesday their plans to open a shop in the Byward Market. Fire & Flower photo

Alimentation Couche-Tard Inc. has agreed to make a strategic investment in Fire & Flower Holdings Corp. of Edmonton, which will use the funds to develop its Hifyre digital retail platform and expand its network of cannabis retail stores.

Currently, Fire & Flower operates or has licensed 23 cannabis retail stores in Alberta, Saskatchewan and Ontario and operates a wholesale distribution division in Saskatchewan and a digital sales platform. Fire and Flower is not a marijuana supplier, but a cannabis retailer.

READ MORE: As retail pot shops launch in Ontario, Ottawa’s three stores open their doors

Couche-Tard said Fire & Flower has “demonstrated that it is capable of rapidly scaling its retail platform through a best-of-class store concept, a leading digital platform and a focus on the safe, responsible and lawful sale of cannabis.”

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The companies say Couche-Tard’s initial $25.9 million investment would initially give it rights to 9.9 per cent of Fire & Flower’s equity, with the potential to increase its stake to 50.1 per cent in return for a total of about $380 million in growth capital.

Fire & Flower CEO Trevor Fencott said the investment will be transformative for the cannabis company.

“The support of Couche-Tard’s world-class leadership team, coupled with their impressive international footprint which includes major markets such as the US, Mexico and Europe, provide us with outstanding opportunities for aggressive growth,” Fencott said in a statement.

WATCH BELOW: On the first day of legalization in 2018, Global Edmonton’s Julia Wong was live at a Fire & Flower store to learn about their business.

Alimentation Couche-Tard is one of North America’s largest operators of convenience stores and gas bars, primarily under the Circle K global brand and under the Couche-Tard banner in its home province of Quebec. It was previously best known in Western Canada for its Mac’s Convenience Stores, which were rebranded in 2018.

READ MORE: All Western Canada Mac’s Convenience Stores to become Circle K

Couche-Tard chief executive Brian Hannasch says the investment will enable the Laval-based retail chain to accelerate its move into the cannabis sector.

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“This investment in Fire & Flower, with a path to a controlling stake, will enable us to leverage their leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector,” Hannasch said in a statement.

READ MORE: Alimentation Couche Tard taking a more laid back approach to selling pot

The companies say an indirect subsidiary of Couche-Tard will initially buy about $26 million of convertible debt securities that can be converted to 24.3 million common shares at a price of $1.07 each, representing 9.9 per cent of equity.

Fire & Flower’s stock is currently listed on the TSX Venture Exchange but it has received conditional approval to list its shares on the Toronto Stock Exchange concurrent with the transaction.

Fire & Flower’s stock price jumped 20 per cent to a two-month high at $1.37 a share following the announcement, while Couche-Tard stock was essentially flat at $80.73 in early trading Wednesday.

READ MORE: Edmonton changes zoning laws so pot shops can open in shopping malls

— With files from Karen Bartko, Global News