Aurora hopes to grow CanniMed investment
Expansion a priority if hostile takeover succeeds, says Vancouver cannabis firm
The company behind the first hostile takeover attempt in Canada's marijuana industry says it plans to continue operating and expanding a large medical marijuana facility southeast of Saskatoon if the bid is successful.
Cam Battley, executive vicepresident of Vancouver-based Aurora Cannabis Inc., said his company wants to keep investing in CanniMed Therapeutics Inc.'s facility if shareholders agree to the deal capped at $24 per share, valuing it at around $550 million.
“We are all about growth and expansion,” Battley said.
“We would not have plans to cut back. We have plans to expand. It's all about growth right now — growth domestically and growth internationally. Like I said, we need everybody. We need all hands on deck.”
Aurora launched its hostile takeover bid last week, after CanniMed's board rebuffed what it described as an unsolicited offer. The larger company has said the takeover would create a medical marijuana company with around 40,000 patients, valued at $3 billion.
The bid comes less than eight months before new federal legislation is expected to make recreational pot legal across the country.
CanniMed, the country's first licensed medical marijuana producer, has more than 200 employees and is in the midst of a $10.5-million expansion of its facility near Saskatoon, which it says will allow for the production of 720,000 litres of cannabinoid oil each year.
The company is urging its shareholders to reject Aurora's bid in favour of a plan to acquire Tragically Hip-backed Newstrike Resources Ltd., a deal it says will combine “the leading medical brand and a high profile recreational brand to create a premier global cannabis company.”
CanniMed president and CEO Brent Zettl was unavailable for an interview this week but said in an emailed statement that while Aurora's offer realizes the company's value, CanniMed's current plan “is extremely well positioned to deliver significant shareholder value.”
“CanniMed has been part of the fabric of the province of Saskatchewan since our inception as a company in 1998 … It has always been my greatest aspiration to hire local and play our part in the economic benefit we offer to the city and province," Zettl said in the statement.
“We have the support of management, employees, shareholders and government officials in our resolve to continue to operate our company in a meaningful way right here at home.”
Aurora launched its bid after shareholders representing a combined 38-per-cent stake in CanniMed approached it with concerns “about the ability of the existing CanniMed management to execute,” Battley said.
Those shareholders saw Aurora as the best fit, he added.
Battley declined to identify the shareholders, but corporate filings identify four backers, including two local venture capital funds: Golden Opportunities Fund Inc., which owns 17 per cent of CanniMed, and Saskworks Venture Fund Inc., which has an eight per cent stake.
CanniMed said it is “very concerned” about Aurora's agreements with those shareholders, and introduced a shareholders' rights plan aimed at preventing the larger company from acquiring any more of its shares until after the vote on Newstrike.
Aurora responded by calling the shareholders' rights plan an “oppressive tactic” that leaves CanniMed's shareholders with limited choices.
The Vancouver-based company added that it filed complaints about the plan in Ontario and Saskatchewan.
Wanda Hunchak, vice-president of Westcap Mgt. Ltd., which manages Golden Opportunities Fund, said in a statement that the fund is “proud to have been an early and first intuitional investor supporting this local company's growth for more than 15 years through to the oversubscribed TSX IPO in 2016 representing its evolution to a mature and successful innovation company.”
Representatives of Saskworks Venture Fund declined to comment.
Battley said earlier this week that he is confident the bid will be successful.
Asked if CanniMed's decision to introduce a shareholders' rights plan changes that position, Battley said in an email that it does not and that feedback from CanniMed shareholders has been “extremely positive.”