Aurora Cannabis Inc. (TSE:ACB) has locked up the support of investors representing about 38% of CanniMed Therapeutics Inc. (TSE:CMED) shares
SmallCapPower | November 17, 2017: Newstrike Resources Ltd. (TSXV:HIP) after Friday’s close acknowledged that it has entered into an agreement to be acquired by CanniMed Therapeutics Inc. (TSX:CMED) in an all-stock transaction. Newstrike Resources shareholders will receive 33 common shares in CMED for every 1,000 common shares of HIP.
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Newstrike Resources is the owner of the marijuana producer Up Cannabis, which received its cultivation license in December 2016, and is based in Brantford, Ontario. Newstrike has three production sites at Brantford, Grimsby and Creemore. Currently, the Brantford facility has a cultivation license with a production capacity of 3,000 kgs. The other two facilities are still under construction and Newstrike Resources expects total production to reach ~10,000 kgs by the end of 2018.
Additionally, Newstrike Resources has a partnership with the Canadian musical artists, The Tragically Hip. This partnership will help the Company to capture the recreational market. Newstrike Resources intends to develop a diverse network of high-quality cannabis brands that addresses the needs of medical clients and eventually, as the law allows, adult consumers.
The transaction will provide CanniMed with increased production capacity along with accelerated penetration into the adult-use cannabis market.
This news came out just a day after Aurora Cannabis Inc. (TSX:ACB) announced its intention to acquire CanniMed. CanniMed acknowledged the offer, saying that it had not received any formal written offer from Aurora Cannabis and the offer is speculative as per the press release. Furthermore, CanniMed cautions that the share consideration is inflated, as it takes into account the recent surge of 124.9% over Aurora’s closing price on the TSX over the preceding 12 trading days.
Aurora Cannabis asserts that it has entered into irrevocable lock-up agreements in support of its proposal from shareholders representing about 38% of CanniMed’s outstanding shares, making it that much easier to wrestle control of the company.
There is currently a lack of supply in the cannabis industry. Additionally, the upcoming Canadian legalization of marijuana for recreational use in July 2018, will further drive demand. Acquisitions are one of the ways a company can increase production capacity. Hence, the Canadian marijuana space could witness heightened M&A activity in the coming months.
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