May 05, 2021

Sundial Growers to Acquire Inner Spirit Holdings and Spiritleaf Retail Cannabis Network

CALGARY, AB (May 5, 2021) — Sundial Growers Inc. (NASDAQ: SNDL) (“Sundial”) and Inner Spirit Holdings Ltd. (CSE: ISH) (OTCQB: INSHF) (“Inner Spirit”) are pleased to announce that they have entered into an arrangement agreement (the “Agreement”) pursuant to which Sundial will acquire all of the issued and outstanding common shares of Inner Spirit for total consideration of approximately $131 million (the “Transaction”). The combined company will continue to focus on providing quality cannabis to consumers through a responsible and disciplined approach while creating enduring value for shareholders.

Under the terms of the Agreement, Inner Spirit’s shareholders will receive, for each Inner Spirit common share held, (i) $0.30 in cash and (ii) 0.0835 of a Sundial common share (representing $0.09 per Inner Spirit common share based on the 10-day volume-weighted average price (“VWAP”) of Sundial common shares on the Nasdaq Capital Market), for total consideration of $0.39 per Inner Spirit common share. The purchase price of $0.39 per Inner Spirit common share represents a premium of 54.8% to the 10-day VWAP of Inner Spirit common shares on the Canadian Securities Exchange (the “CSE”) and a premium of 62.5% to the closing price of Inner Spirit common shares on the CSE on May 4, 2021. The Transaction has been unanimously approved by the Boards of Directors of Sundial and Inner Spirit and is expected to close early in the third quarter of 2021.

The Transaction is expected to provide modest synergies and economies of scale due to the different business models of Sundial and Inner Spirit. “Sundial becomes a stronger and more diverse cannabis company by acquiring Inner Spirit and the Spiritleaf retail store network,” said Zach George, Chief Executive Officer of Sundial. “Inner Spirit has successfully created a franchise-based retail network that has grown from coast to coast and offers a differentiated and premium in-store experience to consumers. Our shared Albertan roots and commitment to data-driven consumer insights make for an ideal partnership. Sundial’s capital base will enable us to support continued expansion and deepen the capabilities of the Spiritleaf retail brand.”

"Sundial is the ideal company to acquire Inner Spirit and support the future development of the Spiritleaf retail cannabis brand,” said Darren Bondar, Founder, President and Chief Executive Officer of Inner Spirit. “The Sundial team has shown a strong commitment to our management team, franchise partners and employees as well as our growth ambitions. The combination will enable us to further expand our position as the country’s leading retail cannabis brand for customers and communities and will open up new market opportunities to us. We’re also very pleased Inner Spirit shareholders will be able to participate in our future success through an ongoing equity ownership."

In just over two years, the Spiritleaf retail network has grown to become Canada’s largest single brand retailer with 86 stores operating in British Columbia, Alberta, Saskatchewan, Ontario, and Newfoundland and Labrador. Spiritleaf’s franchised and corporate stores have created deep ties within their local communities and served 2.3 million guests in 2020. The retail brand has earned a reputation as a knowledgeable and trusted source of recreational cannabis while offering a premium consumer experience. Spiritleaf opened its 86th store on April 28, 2021 in Edmonton, Alberta and is projected to exceed the 100-store milestone in the summer of 2021.

TRANSACTION DETAILS

The Transaction will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (Alberta), pursuant to which Sundial will acquire all of the issued and outstanding common shares of Inner Spirit. The implementation of the Transaction will be subject to the approval of at least two thirds of the shares voted by Inner Spirit shareholders at a special meeting expected to be convened by Inner Spirit in July 2021 (the “Meeting”), and the receipt of applicable orders from the Court of Queen's Bench of Alberta and applicable regulatory approvals.

The Agreement provides for, among other things, customary support and non-solicitation covenants from Inner Spirit, including customary “fiduciary out” provisions that allow Inner Spirit to accept a superior proposal in certain circumstances and a five-business day “right to match period” in favour of Sundial. The Agreement also provides for the payment of a reciprocal termination fee of $4 million in the event the Transaction is terminated in certain specified circumstances. All directors and officers of Inner Spirit, as well as certain other shareholders, have entered into voting support agreements with Sundial pursuant to which, among other things, the parties have agreed to vote their Inner Spirit common shares in favour of the Transaction, representing 29.76% of the outstanding Inner Spirit common shares.

A full description of the Transaction will be set forth in the management information circular of Inner Spirit, which will be mailed to Inner Spirit shareholders in connection with the Meeting, and filed on the System for Electronic Document Analysis and Retrieval (SEDAR) under Inner Spirit’s profile at www.sedar.com. None of the securities to be issued pursuant to the Agreement have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and any securities issued in the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities.

INNER SPIRIT BOARD APPROVAL

Inner Spirit’s Board of Directors has unanimously approved the Transaction and has resolved to recommend that Inner Spirit shareholders vote in favour of the Transaction. Echelon Capital Markets, financial advisor to Inner Spirit, has provided a fairness opinion to the Board of Directors of Inner Spirit that, subject to the assumptions, limitations and qualifications set out in such fairness opinion, the consideration to be received by Inner Spirit shareholders pursuant to the Transaction is fair from a financial point of view to Inner Spirit shareholders.

ADVISORS

ATB Capital Markets is acting as financial advisor to Sundial. McCarthy Tétrault LLP is acting as legal counsel to Sundial. Echelon Capital Markets is acting as financial advisor to Inner Spirit. Burstall LLP is acting as legal counsel to Inner Spirit.

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