As Tom Angell said in his daily newsletter the other day, “Canadian marijuana stocks are soaring!” The marijuana policy reform journalist was referring to a Bloomberg article that mentions fantastic gains for MedReleaf, as well as Canopy Growth Corp, the reigning pure-play marijuana stock with the highest market cap right now – – but then there was the massive leap that Aurora Cannabis just made.
On Monday Aurora announced their Q1 results by highlighting “strong revenue growth, executing on differentiation and expansion strategy.” But to say that’s the reason why they made news this week would be severely burying the lede. On Tuesday, Aurora Cannabis announced that it had submitted a proposal to acquire all shares of another Canadian publically traded Licensed Producer, CanniMed Therapeutics, which trades under CMED on the TSX and closed yesterday @ $19.80 – up nearly 30% on the day. If the Harvey Specter-worthy deal does in fact go through, Aurora will boast a market cap of nearly $3 billion and would become the No. 2 player in the Canadian cannabis industry, behind only Canopy Growth Corp. (WEED.TO)
Aurora wants to acquire all of CanniMed’s issued and outstanding stock in an all-share deal worth up to $24, or about 3.7 Aurora shares per CanniMed share based on Aurora’s closing price of $6.41 on Tuesday – a premium of 57%. CanniMed’s traded as high as $21.25 yesterday and if the deal goes through, CanniMed shareholders would end up holding ~16% of Aurora’s shares. Aurora stated that it submitted a proposal to CanniMed’s board of directors on Monday, and are giving the company until Friday to respond. If the CanniMed board doesn’t respond, Aurora will be launching a formal takeover bid.
The proposed company would merge a roster of 40,000 active registered medical cannabis patients and divert CanniMed‘s established customers into Aurora’s sophisticated e-commerce platform. More importantly, Aurora would gain significant production capacity, creating a conglomeration of five facilities with the ability to grow and process 130,000 kilos of cannabis per year.
And because we’re already seeing Canadian cannabis companies go rogue into the U.S. and Europe—despite warnings from the TSX and the UN—you can guess what comes next. Aurora is already actively moving forward in Germany with the May 2017 acquisition of Pedanios, a major importer, exporter, and distributor of medical cannabis in Europe. Now—thanks to an agreement with Cann Group Limited, which owns nearly 20% of the company—they will be supplying medical cannabis in Australia and the Cayman Islands where CanniMed has already made deals.
Alana Armstrong writes about cannabis, marijuana, pot, weed, and whatever else you might call it. As a newly-minted ACMPR patient, she gained first-hand experience of the amazing benefits cannabis; now she is a passionate advocate for legalization and entrepreneurship. While she stills continues to hypothesize about why the collaboration between Vanessa Beecroft and Kanye matters, her mission is now re-focused on the Green Rush in Canada and the US