{"id":9437,"date":"2018-05-14T17:03:26","date_gmt":"2018-05-14T21:03:26","guid":{"rendered":"http:\/\/business.financialpost.com\/?p=1590910"},"modified":"2018-05-14T17:03:26","modified_gmt":"2018-05-14T21:03:26","slug":"our-eyes-are-on-the-global-market-aurora-acquires-medreleaf-in-largest-cannabis-deal-yet","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2018\/05\/14\/our-eyes-are-on-the-global-market-aurora-acquires-medreleaf-in-largest-cannabis-deal-yet\/","title":{"rendered":"\u2018Our eyes are on the global market\u2019: Aurora acquires MedReleaf in largest cannabis deal yet"},"content":{"rendered":"<p><span style=\"font-weight:400;\">Aurora Cannabis Inc., the hungriest M&amp;A player in the Canadian marijuana space, continued its shopping spree on Monday, announcing plans to acquire rival MedReleaf Corp. for an estimated $3.2 billion, all in stock. <\/span><\/p>\n<p><span style=\"font-weight:400;\">The deal, which is expected to close in August, will unite the second and fourth largest Canadian marijuana companies by market capitalization, creating a potential rival to industry leader Canopy Growth Corp. in terms of geographic reach, product offerings and production capacity. The combined market cap of both companies stood at $7.02 billion at Monday&#8217;s close, compared to Canopy&#8217;s $6.45 billion.<br \/>\n<\/span><\/p>\n<p><span style=\"font-weight:400;\">&#8220;It gives us a footprint in Ontario, it prepares us properly for the adult usage market, the strains that MedReleaf has managed to grow are the leading strains in this country, arguably in the world,\u201d said Terry Booth, Aurora\u2019s chief executive. <\/span><\/p>\n<p><span style=\"font-weight:400;\">MedReleaf shareholders will receive 3.575 Aurora shares for each MedReleaf share they own. That implies a price of $29.44, and a premium for MedReleaf shareholders of around 34 per cent, based on the 20-day weighted average for both companies&#8217; shares. After the deal closes, MedReleaf shareholders will control roughly 39 per cent of the combined company.<\/span><\/p>\n<ul class=\"related_links\">\n<li><a href=\"http:\/\/business.financialpost.com\/commodities\/agriculture\/canadas-top-pot-millionaires-just-got-richer-with-aurora-deal\">Canada&#039;s top pot millionaires just got a little richer<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/cannabis\/bmo-in-on-100-million-financing-deal-for-cannabis-company-cronos\">BMO in on $100 million financing deal for cannabis company Cronos<\/a><\/li>\n<\/ul>\n<p><span style=\"font-weight:400;\">&#8220;Certainly the board of MedReleaf had a fiduciary duty to seek to maximize shareholder value,\u201d said MedReleaf chief executive Neil Closner on a call with analysts on Monday, hinting that his company had spoken with other potential bidders. \u201cBut we&#8217;re sitting here today because we felt that this would be a transaction that afforded our shareholders the best value, both short-term and long-term.&#8221;<\/span><\/p>\n<p><span style=\"font-weight:400;\">The friendly transaction, supported by MedReleaf\u2019s board of directors, stands in contrast to Aurora\u2019s recent acquisition of CanniMed Therapeutics Inc., a months-long hostile bid that involved legal wrangling and executives bad-mouthing one another. That deal, initially priced at over $1 billion, was the largest acquisition in Canadian cannabis space prior the MedReleaf deal. <\/span><\/p>\n<p><span style=\"font-weight:400;\">Although, two-thirds of MedReleaf shareholders still need to vote in favour of Monday\u2019s deal, shareholders controlling 56 per cent of the company\u2019s shares have already signed lock-up agreements supporting the merger, suggesting there\u2019s little risk that the deal will not get done. <\/span><\/p>\n<p><span style=\"font-weight:400;\">MedReleaf, which has cultivation facilities in Markham and Bradford, Ont., and plans to convert a 1 million square foot greenhouse in Exeter, Ont., gives Aurora exposure to what\u2019s expected to be the largest provincial recreational market once adult-use is legalized later this year. <\/span><\/p>\n<p><span style=\"font-weight:400;\">Aurora, by contrast, has focused on facilities in Alberta \u2013 including an 800,000 square foot facility under construction in Edmonton, and a 1.2 million square foot facility planned for Medicine Hat \u2013 and to a smaller extent, in Quebec. <\/span><\/p>\n<p><span style=\"font-weight:400;\">MedReleaf also gives Aurora three recreational brands \u2013 San Rafael \u201871, AltaVie, and Woodstock \u2013 along with the additional growing capacity needed to get product on shelves on day one of recreational legalization. That\u2019s not, however, the main reason for acquisition, according to Cam Battley, Aurora\u2019s chief corporate officer.<\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cOur eyes are on the global market,\u201d said Battley. \u201cThe scale of the global medical cannabis market dwarfs everything that we\u2019ll ever be able to achieve in Canada.\u201d<\/span><\/p>\n<p><span style=\"font-weight:400;\">Both companies have a presence in Australia and Germany, and Aurora is currently building a facility in Denmark that it hopes to use to supply the European Union. Here MedReleaf\u2019s focus on developing medical grade products could prove important. <\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cThis is truly a pharma play,\u201d said Booth. &#8220;MedReleaf\u2019s science teams, they are better than Aurora&#8217;s.\u201d<\/span><\/p>\n<p><span style=\"font-weight:400;\">Aurora is not, however, pivoting away from the recreational market. Last week the company announced that it had increased its stake in Alberta based liquor store chain Liquor Stores NA, recently renamed Alcanna Inc., to 25 per cent. Alcanna gives Aurora a vertically integrated path to recreational consumers in the Western provinces that will allow private cannabis retail.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight:400;\">With all the M&amp;A activity, however, at least one analyst is expressing concern. &nbsp;<\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cThe pace of acquisitions at Aurora is extremely fast, as the company has just recently started to integrate Cannimed,\u201d Martin Landry, an analyst with GMP Securities L.P., wrote in a note to clients. \u201cWe believe that the integration of another major acquisition in such a short time frame could be challenging, putting a strain on management and a distraction on the daily operations.\u201d<\/span><\/p>\n<p><span style=\"font-weight:400;\">Not so, at least according to Booth. <\/span><\/p>\n<p><span style=\"font-weight:400;\">&#8220;We&#8217;re not going to be doing a lot of changes at MedReleaf. Why would we? They&#8217;ve got wonderful facilities and great people, there&#8217;s not a lot to fix there, it&#8217;s just a matter of back-end integration first, and then look after the rest,&#8221; he said. <\/span><\/p>\n<p><span style=\"font-weight:400;\">Aurora stock dropped 2.11 per cent on Monday closing at $7.90. MedReleaf gained 1.45 per cent, closing at $25.26.<\/span><\/p>\n<p>mrendell@postmedia.com<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&ldquo;The pace of acquisitions at Aurora is extremely fast, as the company has just recently started to integrate Cannimed,&rdquo; according to one analyst<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/9437"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=9437"}],"version-history":[{"count":1,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/9437\/revisions"}],"predecessor-version":[{"id":9438,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/9437\/revisions\/9438"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=9437"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=9437"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=9437"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}