Aurora makes all-share offer for medical pot firm CanniMed
Deal would create a $3B-plus company serving approximately 40,000 patients
Vancouver-based Aurora Cannabis Inc. said Tuesday that it has made an all-share offer for CanniMed Therapeutics Inc., a fellow Canadian medical marijuana company.
CanniMed shareholders will be entitled to receive up to $24 per CanniMed share — a premium of approximately 56.9 per cent over their Tuesday closing price of $15.30 — or 4.52586207 Aurora shares, based on the 20-day volume weighted average price of Aurora, the company said in a release.
However, based on the $6.41 closing price of Aurora shares on Tuesday, this would actually work out to 3.74415 Aurora shares for each CanniMed share, according to the release. At Tuesday’s prices, CanniMed shareholders would hold approximately 16 per cent of the issued and outstanding shares of Aurora if the deal closes.
“Aurora and CanniMed are a great fit, truly complementary, and I am convinced we can generate even greater value by combining the two companies and aligning our efforts strategically,” said Terry Booth, chief executive of Aurora, in a press release.
“Aurora has the management expertise, capital markets strength, distribution channels, brand power and growth prospects to successfully integrate CanniMed into Aurora — the fastest-growing cannabis company with the sector’s most exceptional execution track record.”
Aurora said in a release that it had delivered its offer to CanniMed’s board of directors on Monday, seeking “a mutually agreed upon combination with CanniMed.” According to the release, Aurora requested a response before the weekend, “failing which, Aurora intends to commence a formal takeover bid for CanniMed.”
Aurora also said it has “irrevocable lock-up agreements” with about 38 per cent of CanniMed shareholders.
“Under the lock-up agreements, the locked-up shareholders are precluded from tendering or voting any of their CanniMed common shares in favour of any other acquisition proposal relating to CanniMed and are required to vote against other acquisition proposals or actions which might prevent, delay or frustrate Aurora’s proposal,” said a release.
Based on market value, Aurora said the deal would create a more than $3-billion cannabis company that would serve approximately 40,000 medical marijuana patients.
Canadian marijuana stocks have been on a tear recently — gaining in value ahead of the federal government’s July 2018 target date to legalize recreational cannabis — and shares of Vancouver-based Aurora are no different. The company’s shares were up 7.37 per cent for the day on Tuesday, as well as 120.27 per cent over the past month, and 134.8 per cent for the year.
The deal follows U.S.-based beverage giant Constellation Brands Inc. paying approximately $245 million for a 9.9-per-cent stake in Smiths Falls, Ont.-based Canopy Growth Corp., Canada’s largest licensed producer of medical marijuana. The transaction, viewed as a game-changer for Canada’s cannabis industry by some, could also allow Constellation, whose brands include Corona beer and Kim Crawford wines, to double its stake at the same price.
Aurora reported its latest results last week, recording a 169-per-cent increase in revenue for its fiscal first quarter, to $8.2 million. The company booked net income of $3.6 million for the three months ended Sept. 30, up from a $5.6-million loss for the same stretch in 2016.
Aurora said it had sold 889,965 grams and gram equivalent of cannabis for the quarter, up 18 per cent from the three months that preceded it.
“What this does, is it gives us additional, significant strength on the medical side,” said Cam Battley, executive vice-president at Aurora, in an interview.
CanniMed Therapeutics could not be immediately reached for comment.
Meanwhile, Canopy Growth. reported Tuesday that it took a $1.6-million loss in its fiscal second quarter, a slip that comes as the company gears up for Canada’s planned legalization of recreational cannabis and basks in a groundbreaking deal with a U.S.-based alcohol giant.
Canopy reported a 107-per-cent increase in revenue for its second quarter, to $17.6 million, but a net loss of $1.6 million, or one cent per share. Canopy, Canada’s largest medical marijuana producer, had reported a net gain of $5.4 million, or five cents per share, for the same period last year.
But Bruce Linton, the company’s chief executive, told a conference call Tuesday morning that the events that have taken place since the end of the quarter, including a deal to sell a stake to Constellation Brands, have overshadowed the quarterly results.
“It seems that, with our company and maybe this sector generally, the subsequent events are greater than the prior period’s total events,” Linton said.
The quarterly dip was driven in part by increased expenses.
Vancouver-based Aurora’s medical pot facility is seen near Cremona, Alta. Aurora is seeking a combination with CanniMed amid an upswing in marijuana stocks ahead of recreational pot’s July 2018 legalization.