CanniMed Therapeutics Inc. (TSX:CMED) postponed its key shareholder meeting to allow discussions regarding a possible transaction with Aurora Cannabis Inc. (TSX:ACB)
SmallCapPower | January 19, 2018: CanniMed Therapeutics Inc. (TSX:CMED) Thursday announced the postponement of its key shareholder meeting to January 25, 2018, from January 23, 2018. CanniMed has determined to postpone the Meeting to allow discussions regarding a possible transaction with Aurora Cannabis Inc. (TSX:ACB) as permitted under the terms of the Arrangement Agreement between CanniMed and Newstrike Resources, dated November 17, 2017. Aurora Cannabis made an offer to buy all the shares of the Company at $24 per share, contingent on CanniMed Therapeutics abandoning its agreement to acquire Newstrike.
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The cut-off time for the deposit of proxies for the Newstrike acquisition will be at 10:00 am (EST) on Tuesday, January 23, 2018. Newstrike Resources has consented to the postponement. A mutual agreement was reached between CanniMed Therapeutics and Aurora Cannabis to standstill until the proxy votes on the Newstrike acquisition. If the Newstrike acquisition goes through it would broaden the product offering for CanniMed and shareholders should see a 14.6% accretion to $1.54 EBITDA per share. Conversely, if Aurora’s hostile bid materializes, CanniMed shareholders will experience a 48.4% dilution to $0.69 EBITDA per share based on Aurora’s January 16, 2018 last 20-day VWAP. This means Aurora is offering shareholders $0.85, or 55%, less than what a combined CanniMed and Newstrike offers shareholders.
The Newstrike Resources Offer requires CanniMed shareholders to approve the transaction. Given that 38% of CanniMed Therapeutics shareholders have contractually agreed to support the Aurora Offer and to vote against any proposed action by the CanniMed Board, the Newstrike Resources offer is a highly-conditional proposition with significant uncertainty. Investors will have to sit back and wait to see which deal goes through.
With the ongoing takeover bid, CanniMed Therapeutics shares have surged more than 65% in the past month. Currently CanniMed Therapeutics stock is trading at a Price to Sales multiple of 52.99x, which is relatively lower as compared with the industry average.
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