Earlier this week, we learned that Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) had come to terms to acquire yet another company: Whistler Medical Marijuana. The deal, valued at $175 million, will of course be yet another all-stock transaction between the two companies. With only $148 million in cash on its books last quarter and the company burning through a lot of it during the course of its operations, there simply isn’t a lot for Aurora to spare. However, that shouldn’t come as a surprise to investors anymore.
Who is Whistler Medical Marijuana?
Whistler Medical’s focus is on organic grown cannabis. On its website, it touts its philosophy as “Grow[ing] organic medical cannabis, in soil without the use of chemicals.” Each of its strains take around five months to get grown and packaged, as the company claims that “every stage of the growing process is carried out by hand.”
When it comes to medicinal marijuana, ensuring the quality and consistency of it is paramount for patients to be able to rely on it. By focusing on natural ingredients and a chemical-free process, the company aims to provide its customers with the safest possible product. Whistler Medical is also part of the Fraser Valley Organic Producers Association (FVOPA). As a result, its facilities are inspected on a regular basis to ensure compliance. This helps to add credibility to the company’s claims as it provides investors with something tangible.
The company has two facilities in and around Whistler. Production capacity is expected to reach 5,000 kg annually once both locations are fully up and running.
Could we see more acquisitions on the way?
We haven’t seen many big mergers and acquisitions in the industry for a while, but that could change soon. Now that the U.S. has legalized hemp, there will likely be many cannabis companies vying for market share in the coming months. We’ve already seen rival Canopy Growth Corp (TSX:WEED)(NYSE:CGC) secure a license for hemp in New York as it has wasted no time in trying to get into the market as soon as possible. Aurora could also be planning a move south of the border, and acquiring Whistler Medical could be a good way to penetrate the market, by appealing to consumers looking for safe, organic options.
The problem is that with a supply shortage in Canada already impacting the industry, the U.S. market could further complicate matters. And as much as Aurora and other cannabis companies want to build market share in Canada, they also don’t want to miss out on a great opportunity in the U.S.
For that reason, I wouldn’t be surprised if we see more mergers and acquisitions. We already saw a company eyeing Aphria Inc (TSX:APHA)(NYSE:APHA) in a potential takeover, and that could just be the start. Many beverage companies have been keeping an eye on the industry for some time and the passing of the Farm Bill could revive that excitement.
The cannabis industry has been running at a rapid pace over the past few years and things are not going to slow down anytime soon.