Aphria Inc. said it's skeptical that an Ohio-based company's hostile takeover offer would be a good deal for the Canadian cannabis company's shareholders, a view shared by at least one pot sector analyst.

Aphria said before markets opened Friday that the actual value of the shares it's being offered is substantially lower than the announced offer price and undervalues the Leamington, Ont.-based producer of legal cannabis.

In afternoon trading Friday, shares of Xanthic Biopharma Inc., which does business as Green Growth Brands, were at $5.16, up 18 cents, at the Canadian Securities Exchange. At that price, its offer of 1.5714 Xanthic shares per Aphria share would value the Canadian company at about $8.10 per share.

The newly installed chairman of Aphria's board said in a statement Friday that "their proposal falls short of rewarding our shareholders for participating in such a transaction."

"Further, the proposed offer is quite risky given GGB's condition to complete a brokered financing at a price that is more than double the recent average of their share price, as a key term to the proposal," said Irwin Simon, who was named chairman of the Aphria board after Green Growth Brands announced its offer Thursday afternoon.

Vic Neufeld, who had been chairman, will remain Aphria's chief executive officer and a director on Aphria's board.

Aphria Inc. shares shot up as much as 14 per cent early Friday before giving up some of their initial gains. Its shares were off their early highs at $8.50 at 3:20 p.m. at the Toronto Stock Exchange, up 93 cents from Thursday's close at $7.57.

Green Growth Brands made its offer conditional on completing a financing deal that values its shares at $7 each. At that price, its offer would be worth $11 per Aphria share.

Peter Horvath, CEO of Green Growth, said Friday that his company has received considerable interest from investors, so he thinks it will be able to raise $300 million based on a valuation of $7 per Xanthic share.

"The question is: will shareholders agree at an $11 valuation?" Horvath said.

"Clearly the board … has said that is too low but given the uncertainty that there's been around the performance of the stock of late, we picked a number that we think represents an acceptable premium at 45 per cent."

Shares of publicly traded companies selling cannabis have been volatile over the last few months. (Graeme Roy/Canadian Press)

However, a research note issued Friday by GMP Securities analyst Martin Landry says an offer based on Green Growth's proposal "looks ambitious" given that it's a new company with a market value that's much lower than Aphria's.

"As it stands, GGB's potential offer is not attractive given its highly conditional nature and given it lacks a takeover premium," Landry said.

He also said the appointment of Simon as chairman of Aphria's board is a good sign because of his track record as an entrepreneur and experience in the packaged food industry through The Hain Celestial Group.

"He is a strong addition to Aphria's BOD [board of directors] and a great step in the right direction to improve governance," Landry wrote.

GMP has lowered its price estimate for Aphria to $14 as a result of allegations, which are under review and haven't been proven, that a proposed acquisition target has worthless assets.

Cannabis companies' shares volatile

Shares of most publicly traded cannabis companies have been volatile over the last few months, including those of Aphria Inc., after its plan to acquire LATAM Holdings came under fire in early December.

In early December, short-sellers Quintessential Capital Management and Hindenburg Research alleged that the company's acquisition of the LATAM Holdings assets in Colombia, Argentina and Jamaica totalling $280 million from Scythian Biosciences were "largely worthless."

Gabriel Grego, of Quintessential Capital Management, argued Aphria had spent $700 million buying up subsidiaries which don't add any value to the company and did little besides enriching insiders at the companies that were taken over.

Short-seller Hindenberg levelled fresh criticism Friday, suggesting the proposed takeover may not be hostile at all.

New: The Latest Act in The Aphria Circus- A Very Obviously Related-Party ‘Hostile’ Takeover Offer<a href="https://twitter.com/search?q=%24APHA&src=ctag&ref_src=twsrc%5Etfw">$APHA</a> <a href="https://twitter.com/search?q=%24GGB&src=ctag&ref_src=twsrc%5Etfw">$GGB</a> <a href="https://t.co/RTDbM7rJld">https://t.co/RTDbM7rJld</a> —@HindenburgRes

It said Green Growth Brands' second largest shareholder is a fund sponsored by Green Acre Capital, "a firm that lists none other than Aphria CEO Vic Neufeld on its board of advisors."

"Aphria has invested directly in the fund and therefore already owns a significant stake in GGB," the statement said.

Additionally, its statement said Green Growth recently listed a current Aphria board member on its own board of directors, and that other recent Green Growth directors have "obvious affiliations with Aphria."

Neufeld, who had been chairman through the controversy, will remain Aphria's chief executive officer and a director on Aphria's board.

Takeover offers that are made directly to shareholders without approval of the target company's board of directors are considered to be hostile bid. But Green Growth's Horvath said Friday that his company would prefer a friendly deal because the proposal hinges on the expertise that each company brings to the table.

"Aphria brings proven cultivation experience and, from what we've seen, they're bringing that in a highly sophisticated and technological way to cannabis," Horvath said in an interview with The Canadian Press.

Horvath also said in a statement Thursday that an acquisition of Aphria would increase value for shareholders of both companies.

"We are confident that the significant premium we are offering and the opportunity to participate in the growth of a stronger, combined company are so compelling that we are taking our offer directly to Aphria's shareholders," he said.

But Hindenberg says that's not the case.

Differing views

Its statement said Green Growth was just formed this year, has almost no revenue or tangible assets, and has limited operations. "Despite this, its newly listed, thinly traded stock has spiked to a market cap of $890 million on average daily dollar volume of only $1.3 million."

Hindenberg called Green Growth "largely a worthless entity with numerous signs of Aphria related-party influence."

"This entire proposed deal strikes us as merely an epic next step of Aphria's brazen shell game," the statement said.

Aphria, which has its main operations in the southwestern Ontario community of Leamington, said it has established an independent committee of directors to consider any formal offers it receives.

In the meantime, Aphria said it would continue to execute its current corporate strategy.

"It's business as usual for us right now," said John Jacobs Jr., Aphria's labour director.

Requests for further comment from Aphria's executive team were declined.

Class-action bid filed

Earlier this month, a Toronto law firm said it filed a proposed class action against Aphria and its chief executive and financial officers after the company was targeted by short-sellers.

Koskie Minsky LLP alleges Aphria made false and misleading statements related to its acquisition of LATAM Holdings, a claim that has not been tested in court.

The proposed class action came after the short-sellers' allegations.

Aphria said on Dec. 6 that it had set up a special committee of independent directors to review the LATAM acquisition.