Under the terms, Sundial will pay a total of C$0.39 for each Inner Spirit share. The amount includes C$0.30 cash and 0.835 Sundial share for each Inner Spirit share.
At last check Sundial shares traded on Nasdaq were up 4.6% at US$0.83. Inner Spirit shares traded over the counter in the U.S. closed Tuesday off 4.2% at US$0.20.
"Sundial becomes a stronger and more diverse cannabis company by acquiring Inner Spirit and the Spiritleaf retail store network," Sundial Chief Executive Zach George said in a statement.
Inner Spirit's franchise-based retail network "has grown from coast to coast and offers a differentiated and premium in-store experience to consumers."
The Spiritleaf retail chain is Canada's largest single-brand retailer with 86 stores. The company is projected to exceed 100 stores by this summer.
Both companies boards have approved the terms. The deal is expected to close in the third quarter, subject to conditions including court and regulatory clearances and a vote of Inner Spirit shareholders.
All Inner Spirit directors and officers, plus certain holders, have agreed to vote their stakes -- in total nearly 30% -- for the transaction.
In March, Sundial reported a loss from continuing operations of C$64.1 million (US$51.7 million), compared with a net loss of C$71.4 million ($57.6 million) in the third quarter.
Fourth-quarter revenue of C$16.9 million ($13.6 million) increased 4% from a year earlier and exceeded the analyst consensus estimate of $11.1 million derived from a FactSet survey.
In February, Sundial shares fell after the company filed a shelf registration with the U.S. Securities and Exchange Commission to issue as much as $1 billion of securities over time.