Consolidation in Canada's Marijuana Patch: Aurora to Acquire MedReLeaf
In an all-stock deal valued at C$3.2 billion (about US$2.5 billion), Canadian marijuana grower Aurora Cannabis will acquire MedReLeaf. Both are major Canadian cultivators of cannabis for the medical market, along with related products, and Aurora has opened a facility in Edmonton that will produce more than 100,000 kg of cannabis annually when it is fully operational.
Aurora trades on the Toronto Stock Exchange under the ticker symbol ACB and MedReLeaf trades on the TSX under the ticker symbol LEAF. Among North American companies in marijuana-related businesses, Aurora is the second-largest by market cap, with a value of $4.53 billion and MedReLeaf is sixth-largest with a market cap of $2.52 billion.
The transaction requires the approval of two-thirds of MedReLeaf shareholders, while the issuance of new Aurora stock requires the approval of a simple majority of the company’s stockholders. Holders of more than half (56%) of MedReLeaf’s already have agreed to vote to support the deal.
Under the terms of the deal, MedReLeaf shareholders will receive 3.575 shares of Aurora stock in exchange for each share of MedReLeaf stock. Once the transaction is complete, MedReLeaf shareholders will hold 39% of the stock in the combined company and Aurora shareholders will hold 61%.
Together the two companies have an annual growing capacity of 570,000 kg of cannabis, as well as a strong distribution network in Canada and internationally.
Calling the deal “transformational,” Aurora CEO Terry Booth said:
Our complementary assets, strategic synergies, and strong market positioning will provide us with critical mass and an excellent product portfolio in preparation for the adult consumer use market in Canada. Equally, the combination strengthens our capacity to service the rapidly expanding global medical cannabis markets, and amplifies our early-mover advantage.
MedReLeaf CEO Neil Closner added:
By combining with Aurora, an integrated producer with an exceptionally strong track record for execution, and deep domestic and international distribution capabilities, we will be ideally positioned to set the global standard for our industry at a pace that will be difficult to match.
MedReLeaf shares traded up 2.21% Monday afternoon at C$25.45, while Aurora’s stock traded down about 1.9% at $7.92.
The two companies made our list of the 10 largest North American marijuana companies for 2017.