Regulators close in on Aurora, CanniMed decision
The participants TORONTO in a dispute over the first major hostile takeover attempt in the short history of Canada’s cannabis sector will soon get a ruling after a joint hearing before Ontario and Saskatchewan securities regulators wrapped up Thursday evening.
Alberta’s Aurora Cannabis Inc. made an unfriendly offer in November for Saskatoon-based CanniMed Therapeutics Inc., a fellow pot producer that is pursuing an acquisition of its own and has adopted a shareholder rights plan — or poison pill — in the face of Aurora’s advances.
Lawyers for CanniMed have likened the situation, in which Aurora made its bid as CanniMed was closing in on another deal, to a “sucker punch.” Aurora’s counsel are arguing that CanniMed is trying to prevent their bid from being considered.
Ontario Securities Commission member and vicechair D. Grant Vingoe said the regulators would begin deliberations Friday and that the parties would hear back “soon.”
The dispute may have consequences for more than just the medical marijuana companies involved.
At a joint hearing Wednesday, staff for the regulators underscored that the outcome would be an important one, particularly because it tests rules regarding hostile bids that came into effect last year. Because of this, Kate McGrann, a lawyer speaking on behalf of the regulatory staff, said that the hearing, “will have wide-ranging implications for capital market participants across the country.”
Aurora has applied to the regulators for an exemption under the new takeover regime to shrink the 105-day deposit period, which began after it made its bid, down to 35 days.
That would allow CanniMed shareholders to weigh Aurora’s offer before deciding on CanniMed’s own proposal to acquire Ontario cannabis producer Newstrike Resources Ltd.
CanniMed, however, maintains that Aurora should not get that exemption, which hinges on whether or not CanniMed’s acquisition of Newstrike is an “alternative transaction.”
Counsel for CanniMed said Thursday that the deal did not meet that definition, “a consequence of which the interest of a holder of an equity security of the issuer may be terminated without the holder’s consent, regardless of whether the equity security is replaced with another security,” the national instrument states.
What’s more, Aurora has said its bid for CanniMed is conditional on the latter dropping its planned acquisition of Newstrike.
CanniMed has said Aurora is trying to woo its shareholders with “phantom value,” and its counsel noted Thursday that Aurora could still drop its no-Newstrike condition.
Aurora is also asking the regulators to strike down CanniMed’s shareholder rights plan, which aims to block Aurora from locking up more shareholders or buying shares of CanniMed.