Canadian producer Aurora Cannabis has struck a $40 million stock deal to purchase U.S. hemp firm Reliva, checking off a long-stated ambition for the Alberta company’s executives to enter the United States market.
Under the terms of the acquisition, Aurora will pay $40 million of its common shares. The company will pay an an additional $45 million in cash and stock if certain financial targets are met.
The Edmonton company has long had an eye on the U.S. market.
Last September, an Aurora executive told Marijuana Business Daily the company expected to announce a “significant” entry into the U.S. market “within a very short period of time.”
Natick, Massachusetts-based Reliva sells hemp-derived CBD products. Aurora’s planned purchase marks a reentry into the U.S. for the Canadian producer.
In 2018, Aurora spun off its U.S. subsidiary, Australis Capital.
That came after Canada’s TMX Group – the nation’s largest stock exchange operator – warned that publicly traded cannabis firms with holdings south of the border could be delisted because of the plant’s federally illegal status in the U.S.
But the passage of the U.S. Farm Bill in December 2018 opened an legal avenue for companies to invest there without breaching Canadian stock market rules, sparking a flurry of investments from Aurora rivals Canopy Growth and Cronos Group.
Analysts viewed the Reliva deal in a positive light.
In a note to investors, CIBC Capital Markets said Reliva provides a platform for Aurora to access a large base of customers but warned that the American CBD landscape is crowded and competitive.
Reliva’s CBD brands can be found in more than 20,000 retail stores, according to a company news release.
Reliva, which carries no debt, is profitable. That makes the deal consistent with Aurora’s stated objective to turn its soaring losses into profits by later this year.
BMO Capital Markets noted that Reliva generated 14 million Canadian dollrs ($10 million) in revenue over the past year.
The deal also brings Reliva CEO Miguel Martin into Aurora’s fold.
Martin is a veteran consumer packaged goods executive, which analysts noted as a benefit for the Alberta company.
Martin held senior positions at tobacco giant Altria Group from 2007 to 2011, according to his LinkedIn profile.
However, the acquisition of Reliva adds to Aurora’s M&A spree that includes more than a dozen deals in recent years, causing some experts to say the company lacks focus and discipline.
Those deals – valued at a cumulative CA$4.5 billion – include “the world’s largest cannabis industry transaction.”
The deal to acquire Reliva is expected to close in June.
Aurora trades as ACB on the New York Stock Exchange and Toronto Stock Exchange.