Merger mania is sweeping through Canada’s medical marijuana industry.
Aurora Cannabis offered to acquire rival producer CanniMed Therapeutics for 544 million Canadian dollars ($425 million) in stock, a deal that would be the largest acquisition to date in the North American marijuana industry.
If completed, the merger would create a global marijuana leader and could spark a wave of consolidation, with the larger players “gobbling up” smaller ones, according to analysts.
CanniMed (TSE: CMED), in response, said it would consider the “unsolicited offer.”
The Saskatchewan company also disclosed it is in advanced talks to acquire Toronto-based producer Newstrike Resources (TSX Venture: HIP) through an exchange of 0.033 CanniMed shares for each share of Newstrike.
Aurora is on an aggressive expansion drive, and it has money to spend. The Alberta-based company has raised CA$264.1 million in capital to play with so far this year.
Under its offer, Aurora (Toronto Stock Exchange: ACB) proposed to acquire all of CanniMed’s outstanding common stock. The company already has secured the approval of more than a third of CanniMed shareholders through “lock-up agreements.”
It also urged CanniMed’s board to respond to the offer by 5 p.m. PT Friday – “failing which, Aurora intends to commence a formal takeover bid for CanniMed.”
The proposal, valued at CA$24 per share, would give CanniMed shareholders a 56.9% premium above Tuesday’s closing stock price.
The combined entity would have the second-highest market capitalization in the industry, at CA$3 billion, just behind Canopy Growth’s (TSE: WEED) CA$3.6 billion market cap.
In a news release, CanniMed said its board had not received a formal written offer from Aurora as of Nov. 15: “CanniMed notes that the unsolicited offer is speculative as the Aurora press release cautions that Aurora may determine not to proceed.”
What you need to know about Aurora-CanniMed:
- The proposal was delivered to CanniMed’s board Nov. 13.
- CanniMed had not engaged in active discussions with Aurora as of Nov. 14.
- Aurora has lock-up agreements with 38% of CanniMed’s shareholders to vote in favor of the proposal.
- The combined entity would have 40,000 active registered patients.
- CanniMed expects the deal, if completed, would give it accelerated penetration into the adult-use cannabis market.
- Any transaction between CanniMed and Newstrike would be subject to shareholder approval.
- CanniMed’s current market cap is about CA$450 million; Newstrike’s is CA$225 million.