Aurora Cannabis Set to Challenge Canopy Growth in Australia?

Rumours abound that Aurora Cannabis Inc. (TSX:ACB) is interested in acquiring Australia’s Cann Group Limited

SmallCapPower | May 2, 2018: Aurora Cannabis Inc. (TSX:ACB) Monday responded to speculation that appeared in the Australian Financial Review (AFR) about a potential takeover of Cann Group Limited. Aurora Cannabis holds 22.9% stake in Cann Group, the first Australian company licensed to conduct research on and cultivate medical cannabis in that country. Cann Group has been granted permits for two cultivation and R&D facilities currently operational in Australia’s State of Victoria and has secured funding for a Phase 3 expansion program.

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Aurora Cannabis acknowledged that it had preliminary discussions with Cann Group with regards to a potential acquisition, but the Canadian cannabis producer has categorically stated that no offer has been submitted. Furthermore, Aurora has asserted that there is no certainty about any formal offer or transaction.

Canopy Growth Corporation (TSX:WEED) announced recently that it has launched Spectrum Cannabis Australia, in which it will invest up to A$16 million in the State of Victoria for establishment of Spectrum’s Asia-Pacific headquarters and research and development facility. Canopy Growth is also a significant shareholder in Australia’s AusCann Group Holdings, which will soon sell AusCann-branded cannabis oils produced by Canopy Growth.

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Aurora Cannabis is about to close its acquisition of CanniMed Therapeutics, which will add over 20,000 kilograms per annum to its capacity as well as strengthens the medical cannabis brand. If the speculation turns out to be true, the deal is rumoured to be valued at about $500 million, or $4.50 per share. Like the other big Canadian cannabis companies, Aurora Cannabis doesn’t want to miss out on medicinal cannabis opportunities abroad.

Aurora Cannabis is licensed producer of medical cannabis pursuant to Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR). It operates a 55,200 square foot, state-of-the-art production facility in Mountain View County, Alberta, known as Aurora Mountain, and a second 40,000 square foot high-technology production facility, known as Aurora Vie, in Pointe-Claire, Quebec. A new facility near Edmonton International Airport, known as Aurora Sky, has been granted license in January 2018. After operating at full capacity, Aurora Sky is expected to produce more than 100,000 kilograms per annum of cannabis. Furthermore, Aurora Cannabis is constructing fourth facility in Lachute, Quebec via its wholly-owned subsidiary, Aurora Larssen Projects Inc.

Aurora Cannabis trades at a market capitalization of $4.53 billion on the TSX with price-to-book multiple of 6.92x. After the announcement, the Company’s stock rose 6% on the TSX to close at $8.09 on Monday.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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