CanniMed Therapeutics Inc.’s (TSX:CMED) latest move makes the hostile takeover bid of Aurora Cannabis (TSX:ACB) highly uncertain
SmallCapPower | December 14, 2017: CanniMed Therapeutics Inc. (TSX:CMED) upped its ante against the hostile takeover bid from Aurora Cannabis Inc. (TSX:ACB) by announcing Monday that it has applied to Financial and Consumer Affairs Authority of Saskatchewan (FCAAS) and the Ontario Securities Commission (OSC) for several orders that would put Aurora offer in trouble. Foremost among the regulatory orders is considering the Aurora hostile takeover an “insider bid” as the 38% support shareholder support for the offer came in mostly from insiders that include SaskWorks Venture Fund Inc., Apex Investments Limited Partnership, Golden Opportunities Fund Inc. and Vantage Asset Management Inc. CanniMed argues that this insider lock-up agreements go against the minority shareholders. Other orders include exclusion from the 50% minimum tender condition contained in section 2.29.1(c) of National Instrument 62-104 and cease Aurora’s takeover bid until 105 days after a circular that meets the regulatory requirements of an insider bid.
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The move follows CanniMed adopting a shareholder rights plan (SRP) on November 28 that prevents Aurora from acquiring any additional common shares and entering into additional lock-up agreements. The move is also made before the shortly expected joint hearing that Aurora applied to OSC in response to the poison pill SRP tactics of CanniMed. Aurora is seeking orders to cease trade the SRP and to accelerate the expiry time of the hostile bid to 35 days from the date of the hostile bid.
CanniMed’s latest move makes the hostile takeover bid of Aurora highly uncertain with both parties accusing each other actions as shareholder unfriendly and illegal. CanniMed argues that acquiring Newstrike is more valuable, creating a premium cannabis company focused on both medical and the expected recreational opportunity while it sees the $24 offer from Aurora as low, apart from exposing the CanniMed shareholders to correction in Aurora’s stock price that has zoomed over 100% leading to the announcement. CanniMed also notes that its shareholders would get a maximum of 15.3% for the Aurora Cannabis deal while they would own 65.4% of the combined entity for Newstrike acquisition.
CanniMed also filed Proxy and Directors’ circulars in connection with the announcement and urged shareholders to vote their green proxy in favour of the Newstrike acquisition on January 19, 2018, and to take no action to reject Aurora’s hostile bid. Joint hearing expected shortly would be the key in deciding which way the one-month tussle goes. If the OSC overrules CanniMed’s SRP, then the hostile bid would go through, else CanniMed would be successful in acquiring Newstrike through the proxy voting.
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