Duelling bids a sign cannabis merger fever heating up.

Duelling takeover bids involving a trio of Canadian cannabis companies are the latest sign domestic producers are racing to bulk up before the country’s planned legalization of marijuana by next July.

On Monday, Alberta- based Aurora Cannabis Inc. announced its intention to launch a hostile takeover bid for Saskatchewan- based CanniMed Therapeutics Inc., another medical marijuana producer.

The hostile bid, an all-stock offer which Aurora says could be worth up to $24 per share for CanniMed, comes a week after Aurora says it proposed a friendly offer to CanniMed’s board. CanniMed has instead announced a proposed all- share acquisition of its own for Ontario-based cannabis company Newstrike Resources Ltd.

The two companies say that transaction would create a company with a market value of more than $ 500 million, with CanniMed shareholders ultimately owning approximately 65.5 per cent and Newstrike shareholders 34.5 per cent.

Newstrike, which has a cannabis- connected business partnership with Canadian music legends The Tragically Hip, is “uniquely positioned to be a leader in the massive emerging recreational market,” according to a presentation given Monday morning.

CanniMed president and chief executive Brent Zettl said his board determined that Newstrike was the “optimal partner” for his company, while Jay Wilgar, chief executive of Newstrike, said they had been discussing the proposal for several months.

As for the Aurora offer, CanniMed said no formal offer has been made, and that it is advising its shareholders to take no action. Despite Aurora saying it has the support of 38 per cent of CanniMed’s shareholders for its deal, CanniMed said it only requires support from a simple majority of shareholders to clinch the combination with Newstrike. The companies want the deal to close by early January.

Chris Damas, analyst and editor of the BCMI Report and the BCMI Cannabis Report newsletters, said that Aurora could ultimately end up taking CanniMed to court over its offer.

“I don’t see them as backing down, judging from their previous behaviour,” Damas said in an interview.

Shares of Aurora closed up 6.17 per cent Monday, at $ 5.85. The stock prices for CanniMed and Newstrike jumped 2.02 and 11.76 per cent, respectively, to $ 19.71 and 57 cents.

The attempts at dealmaking could intensify as cannabis companies try to scare up the capital they need to serve their medical customers and the incoming recreational market. A survey of marijuana company executives released Monday by Ernst & Young highlighted the expectation that more mergers and acquisitions in the cannabis industry are in the works.

“Many believe that consolidation is inevitable, leaving a few large players postlegalization,” the study said.

As of Nov. 17, Health Canada’s website shows there have been 74 medical marijuana licenses issued, providing plenty of takeover targets for players inside and outside the industry to make a move on. And another section of the EY report is an interview with the chief executive of Canopy Growth Corp., Bruce Linton, who doubted if many of the names in the business today will still be around tomorrow.

“I believe the vast majority of participants in this market have a limited interest in actually creating a proper and sustained business,” Linton told EY. “Principally, they are here because there’s no money left to be made promoting gold or oil. Only a handful are intending to be successful, long- term companies.”

“Over the long term, I see an industry with two or three major, relevant players and bunch of craft producers,” added Linton.

It was Smiths Falls, Ont.based Canopy that touched off t he l atest r ound of matchmaking by selling a 9.9 per cent stake to U. S.based beverage giant Constellation Brands Inc. The $ 245- million deal, which brought a large out- of- market player into the Canadian cannabis business, has been viewed as a significant milestone for the industry.

Aurora may not e ver make a formal offer, it said i n the release, i ncluding if “CanniMed implements or attempts to implement defensive t actics” or if CanniMed “completes or undertakes to complete any significant transactions, including the proposed, but not yet completed, acquisition of Newstrike Resources Ltd.”

Other players could end up in the mix, and CanniMed may have to find a “white knight” in order to fend off Aurora’s offer, Damas said.

“They can’t let Canopy run away with this industry, especially the international market where CanniMed is also strong,” he said of Aurora.