Canadian medical marijuana provider Aurora Cannabis to buy MedReleaf for $2.5 bn
14 May 2018
Canadian medical marijuana provider Aurora Cannabis Inc today struck a deal to buy its rival MedReleaf Corp. for about C$3.2 billion ($2.5 billion) in stock, as the Canadian government pushes to easing restrictions on its use.
The move comes just three months after Aurora acquired CanniMed Therapeutics Inc for $1.1-billion.
Under the terms of the deal, MedReleaf shareholders will receive 3.575 common shares of Aurora for each MedReleaf common share held.
The exchange ratio implies a price of C$29.44 per MedReleaf common share and a premium of approximately 34 per cent, based on the 20-day volume weighted average prices of Aurora and MedReleaf common shares on the Toronto Stock Exchange as of 11 May 2018.
Post closing, existing Aurora shareholders would own approximately 61 per cent of the company, while MedReleaf investors would hold the remaining 39 per cent.
The agreement includes reciprocal non-solicitation provisions subject to the right of each of the companies to accept a superior proposal and have the right to match any such superior proposal in five business days.
The agreement also provides for reciprocal termination fees of C$80 million, as well as payment of a C$15 million expense reimbursement fee.
The merger with MedReleaf will bring together two companies with a total production capacity of over 570,000 kgs per year of cannabis, through nine facilities in Canada and two in Denmark.
The Canadian government has recently eased the use of marijuana and Prime Minister Justin Trudeau is pushing to legalise marijuana also for recreational use.
Canada has already issued more than a 100 licences, but medical marijuana companies claim that they are still short of the scale needed to profit from the growing North American demand for medical and recreational use.
Toronto Stock Exchange-listed Aurora is the fastest growing cannabis company in North America with a market cap of C$4.5 billion and annual revenue of C$31 million.
The Vancouver-based company operates a 55,000-square-foot cannabis facility in Cremona, Alberta and two others in Quebec.
It is building an automated 800,000-square-foot plant in Alberta that will be capable of producing 100,000 kgs of cannabis annually. When completed, it will be the largest facility of its kind in the world.
Aurora is also completing a facility in Lachute, Quebec through its wholly-owned subsidiary Aurora Larssen Projects Inc.
Aurora also owns Berlin-based Pedanios GmbH, the leading wholesale importer, exporter, and distributor of medical cannabis in the European Union. The company owns 51 per cent of Aurora Nordic, which plans to build a 1,000,000 square foot hybrid greenhouse in Odense, Denmark.
Aurora also holds a 25-per cent stake in Alcanna Inc, which is developing a cannabis retail network in Western Canada, and a 17.23-per cent stake in extraction technology company Radient Technologies Inc, and has a strategic investment in Hempco Food and Fiber Inc.,
Aurora is also the cornerstone investor in two other licensed producers, with a 22.9-per cent stake in Cann Group Limited, the first Australian company licensed to conduct research on and cultivate medical cannabis, and a 17.62-per cent stake in Canadian producer The Green Organic Dutchman Ltd.