Aurora Cannabis Inc. agreed to proceed with its 3.2 million Canadian dollar ($2.5 million) strategic investment in Hempco Food and Fiber Inc., securing a 19.9 percent stake in the Burnaby, British Columbia-based company and access to a rapidly growing health supplement market.
Aurora will have an option to raise its total interest in Hempco to 50.1 percent, a move that would give it a controlling stake in the Canadian hemp company. Terms are subject to shareholder approval.
Hempco (TSX Venture Exchange: HEMP) is one of the world’s largest producers of industrial hemp products.
Aurora Cannabis Enterprises (TSX Exchange: ACB), a wholly-owned subsidiary of Aurora Cannabis Inc., is a licensed producer of medical cannabis.
Under the deal, Hempco agreed to give Aurora right of first refusal to purchase its industrial hemp flowers and leaves should regulations change to allow for the extraction of CBD from hemp.
The investment involves Aurora agreeing to purchase 10,558,676 shares of Hempco for CA$0.3075 apiece. Each share comes with one warrant that gives Aurora the right to purchase an additional common share of Hempco for CA$0.41 over a period of two years.
In connection with the CA$3.2 million investment, Aurora agreed to loan Hempco CA$1.5 million at a 10 percent interest rate. Funds advanced by Aurora, including the CA$750,000 previously announced, will be applied against the price for the investment.