Birth of the world's largest producer: Aurora acquires main rival Cannimed

Aurora Cannabis, Canada's second largest cannabis producer, will buy its smallest rival CanniMed Therapeutics.

The transaction is worth C $ 1,1 billion ($ 852 million). This operation will unfold as companies push to legalize recreational cannabis this year in Canada.

Cannimed, Producer, Canopy, CanniMed Therapeutics, Aurora

The agreement aims to create the first cannabis producer in the world in market value. It follows months of tension between companies. Originally, Aurora had made a hostile offer capped at 24 $ CA per CanniMed share. She raised to 43 $ CA in the new offer.

The transaction marked the largest cannabis industry transaction in the world. It brings the value of cannabis transactions to date to $ 1,2 billion. This is double that of 2017, which is a record, according to data from Thomson Reuters.

Activity was largely concentrated in Canada, which is expected to legalize recreational use of marijuana by mid-2018. The country will become the second country in the world to do so after Uruguay.

With countries like Australia and Germany allowing medical marijuana, Canada's recreational decision gives it an advantage.

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While several US states have legalized cannabis for medical or recreational purposes, the substance remains illegal at the federal level.

By buying CanniMed, Aurora hopes to strengthen his capacity to meet domestic demand and to increase its distribution in the whole world.

"The activity is where the medical cannabis export markets are located, which are much larger than Canada," said said Chris Damas, editor of the BCMI Cannabis Report. “CanniMed has patents, they have relationships with different universities, research and clinical trials, and export relationships with other countries, and Aurora wants to add to their own relationships in Europe. "

"A sacred adventure"

So far the sector has continued on a relentless upward trajectory.

CanniMed stock rose 11,7% to close at C $ 41,90 after jumping 23%. Aurora shares retreated to end down 5,9% at C $ 13,98.

However, the price of Aurora shares has increased by 395% in the last three months. Over the same period, that of CanniMed increased by 257%.

CanniMed itself was in a friendly deal to buy Newstrike Resources Ltd, but canceled it on Wednesday.

"It's been a hell of a journey, but the things we are going to do together in 2018 and beyond will be amazing," to Reuters Aurora Managing Director Cam Battley. “Newstrike wasn't really on our radar screen. Our interest was mainly in CanniMed. "

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Concern for Canopy

The transaction would give the combined entity a market value of C $ 7,4 billion, exceeding Canopy Growth Corp's C $ 6,7 billion. Canopy shares closed 4,8% lower at C $ 34,87. This is the third round of setbacks for the company.

“If I were Canopy I would be worried,” Damascus said. The bigger the Aurora, the stronger the competition will be in Canada and abroad. "

Nevertheless, Canopy will retain its leadership position. In fact, the production capacity of existing and planned facilities exceeds those of Aurora and CanniMed.

So if Canopy remains ahead in terms of production, it is only on market value that Aurora takes the lead.

The market value of the new combined entity would also outperform some older, well-established Canadian companies, including Bombardier Inc., which is valued at approximately 7,1 Canadian dollars.

Aurora's revised offer of 3,4 of its shares for each CanniMed security equals C $ 43,00, based on an Aurora implicit price of C $ 12,65, or a premium of 15% on CanniMed's closing price on Tuesday.

The deal requires shareholder and regulatory approvals. Aurora has received the support of 36% of CanniMed shareholders.

Tags : AuroraCanopy
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