Cannabis Grower Aurora Plans to Go Hostile With CanniMed BidBy
Aurora to take $456 million offer to shareholders this week
Step comes after CanniMed announced takeover of Newstrike
Aurora Cannabis Inc. plans to take its C$582 million ($456 million) takeover offer for CanniMed Therapeutics Inc. directly to shareholders after the management of the rival Canadian marijuana grower rejected merger talks.
The process of offering investors Aurora stock worth C$24 per CanniMed share will begin this week, Vancouver-based Aurora said Monday in a statement. The bid is 57 percent higher than CanniMed’s closing price on Nov. 14, the day before Aurora first announced the offer. Investors holding 38 percent of CanniMed shares have agreed to support the deal, according to Aurora.
The move to go hostile sets up a three-way takeover battle in Canada’s nascent marijuana sector, which is witnessing surging stock prices and investor interest ahead of legalization next year. Aurora, along with Aphria Inc. and Canopy Growth Corp., have emerged as the three leading players, each with market capitalizations of more than $1 billion even though none of them have positive cash flow. Shares of Aurora, which has annual revenues of less than C$20 million, have gained more than 80 percent this month.
CanniMed announced Nov. 17 that it had agreed to acquire Newstrike Resources Ltd. for about C$248 million. Aurora said Monday that the terms of the Newstrike deal are "oppressive" to CanniMed shareholders. In particular, it cited the C$9.5 million termination fee CanniMed would pay if it chose to go with another deal, including that proposed by Aurora.
Dara Willis, a CanniMed spokeswoman, said the company had no immediate comment.
Aurora said its offer for CanniMed will create a company with more than 40,000 registered cannabis patients in Canada, the funded capacity to produce more than 130,000 kilos (286,600 pounds) of marijuana annually, and an expanded international presence.
In September, Ontario became the first Canadian province to announce how it will regulate and distribute sales of marijuana after the legalization of recreational sales, which is due to happen by July.
CanniMed rose 2 percent to close at C$19.71 Monday in Toronto. Aurora added 6.2 percent to C$5.85, while Newstrike rose 12 percent to 57 Canadian cents.