Aurora Cannabis Inc. (TSE:ACB) would have cultivation capacity of over 130,000 kilograms of annual production with the addition of CanniMed Therapeutics Inc. (TSE:CMED)
SmallCapPower | November 16, 2017: Aurora Cannabis Inc. (TSX:ACB) announced late Tuesday that it has submitted a proposal to acquire all of the issued and outstanding common shares of CanniMed Therapeutics Inc. (TSX:CMED). As per the proposal, CanniMed shareholders will be entitled to receive a maximum of $24.00 per CanniMed share, which represents a premium of ~56.9% over the closing price of CanniMed shares on November 14, 2017. If the deal goes through, CanniMed shareholders will own ~16% of the issued and outstanding shares of Aurora Cannabis.
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Through this deal, both the companies with their unique and complementary strengths would drive value by lowering the production costs while connecting consumers via market leading brands. The combined entity will have a total of over 40,000 active registered cannabis patients in Canada, which will be supported by a significant cultivation capacity of over 130,000 kilograms of annual production with significant additional capacity planned. International presence of both companies will further strengthen with operations and agreements in the European Union, Australia and the Cayman Islands. Overall, this deal would result in a substantial synergy through the creation of a global leader in the cannabis industry with a pro-forma market capitalization exceeding $3.0 billion.
The proposal was delivered to the Board of Directors of CanniMed on November 13, 2017, post which Aurora Cannabis shares surged 29%. CanniMed has not yet engaged in active discussions with Aurora, however, Aurora Cannabis welcomes the opportunity to do so, such that CanniMed’s shareholders can benefit from the significant inherent value due to the acquisition. Aurora Cannabis has requested that CanniMed’s Board respond to the Proposal prior to 5:00 pm (Vancouver time) on Friday, November 17, 2017, failing which, Aurora intends to commence a formal takeover bid for CanniMed.
Aurora Cannabis shares have surged more than 110% in the past month. Aurora Cannabis currently trades at an astronomically high Price to Sales ratio of 129.25x.
The expected supply shortfall of marijuana in Canada once it becomes legal for recreational use, anticipated in July 2018, has Licensed Producers scrambling to ramp up production. Thus, investors can likely expect more acquisition announcements in the Canadian marijuana space in the coming months.
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in any of the companies mentioned above.
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