On Tuesday, Nov. 14, Aurora Cannabis, one of Canada’s largest licensed producers, announced that it had submitted a formal proposal to acquire CanniMed Therapeutics, a rival LP, in a $582 million deal that if successful, would be Canada’s largest cannabis acquisition yet. If CanniMed does not respond to the offer by 5:00pm PST today, Aurora has said it will launch a formal takeover bid for the company.

Making this even more interesting is that on Wednesday, Nov. 15, CanniMed confirmed that it is having advanced merger talks with another licensed producer, Newstrike Resources.

Canada only has 50 or so licensed producers, so if both of these deals are made, this will shake-up the LP landscape considerably and could signal a period of frenzied consolidations and mergers within the nascent Canadian cannabis industry in the lead up to legalization.

The details of the Aurora Deal

Aurora’s all-share proposal offers CanniMed shareholders up to $24 per share, putting a 56.9% premium on CanniMed’s Nov. 14 closing price. Aurora also said that it already has the support of 38% of CanniMed’s shareholders in an irrevocable lock-up agreement that prohibits the shareholders from supporting any other acquisition proposal.

If the deal goes through, CanniMed’s shareholders would own approximately 16% of Aurora Cannabis.

According to Aurora Cannabis, it delivered the proposal to CanniMed’s board of directors on Monday, Nov. 13th, and on Tuesday, Nov. 14, Aurora announced its proposal at the request of the Investment Industry Regulatory Organization of Canada.

Aurora Cannabis sees major value in this acquisition, saying that the combined company would serve over 40,000 medicinal patients with a market cap of over $3 billion.

The acquisition would also expand the company’s production capacity to over 130,000 kg of cannabis per year and help Aurora break into the EU, Australia, and Cayman Islands, according to the press release. It’s worth noting that the last location mentioned, the Cayman Islands, is a notorious tax haven for the super-rich.

CanniMed’s response

So far, the response from CanniMed to Aurora’s unsolicited proposal has been anything but warm, opening up the possibility that if Aurora proceeds with a takeover, it may not be friendly at all.

On Wednesday, Nov. 15, CanniMed issued its own press release where it said that its board of directors had yet to receive a formal written proposal- contrary to Aurora’s claims that it sent one on Nov. 13.

CanniMed also called the unsolicited offer speculative with inflated values, and said, “We advise shareholders to take NO action until such time as the Board has had the opportunity to fully consider and make a recommendation regarding the Unsolicited Offer”– although it confirmed that it would respond to Aurora’s offer by today’s 5:00pm PST deadline.

In addition, CanniMed announced its intentions to acquire Newstrike Resources, another licensed producer, at a proposed share ratio of 33 CanniMed common shares for every 1000 Newstrike common shares.

 

Sources

BusinessWire: CanniMed acknowledges Aurora press release and announces exclusivity agreement and intention to acquire Newstrike Resources Ltd.

CBC: CanniMed tells shareholders to wait while it reviews Aurora offer.

Financial Post: Aurora Cannabis makes proposal to acquire rival medical marijuana company called CanniMed.

Financial Post: Tragically Hip-backed Newstrike confirms merger talks with CanniMed

Global News: Shareholders told to wait while CanniMed reviews Aurora offer.