Aurora Cannabis Inc (TSE: ACB) (NASDAQ: ACB) (FRA: 21P) shares jumped more than 20 per cent on the Nasdaq on Aug. 11, climbing to about US$3.48 after Curaleaf Holdings Inc (TSE: CURA) (OTCMKTS: CURLF) announced plans for a hostile takeover bid. The Canadian company’s stock posted one of its biggest one-day rises in nearly a year.
Curaleaf wants to pay the equal of US$4.00 for each Aurora share. That mix includes ~0.35 Curaleaf shares and US$0.75 in cash. The deal values Aurora at roughly US$272 million and sits 45 per cent above Aurora’s recent average share price. The figure rises to 110 per cent if Aurora’s cash holdings are left out. Curaleaf could raise the top value to US$5.00 if its own shares climb sharply.
Curaleaf has only announced its intention so far. Canadian rules require it to file and mail formal takeover documents before shareholders can accept or reject the bid. That step has not happened yet. Curaleaf says it wrote to Aurora’s leaders in June and July and received no feedback, but Aurora disagrees. It says its directors did reply and that only one letter listed money terms. Aurora will now set up a special board committee to study the bid.
Supporters of the deal point to clear gains. They say the pair would cut costs by at least US$40 million a year and build a stronger global business. Meanwhile, analysts at TD Cowen are among those who have taken a different view. They say the price looks too low and fails to capture Aurora’s full future worth in medical cannabis.
Together the companies would work in 17 countries. They would bring in more than US$1.5 billion in yearly sales and nearly US$350 million in adjusted earnings. Aurora would add over 50 tonnes of yearly high-standard growing capacity in Europe. Curaleaf would supply processing plants and sales networks in key markets such as Germany, Britain and Poland. The joint firm would have a stock market value near US$3 billion.
Aurora focuses almost entirely on medical cannabis and ranks as Canada’s top medical seller and exporter. Curaleaf already holds a large place in the United States. A successful deal would give Aurora investors a stake in that bigger American market.
In April, the U.S. government moved FDA-approved cannabis medicines and cannabis grown or sold under state medical licences into Schedule III. This less strict category cuts tax burdens and eases some federal rules for those medical operators. Adult-use cannabis remains in the tightest category for now, though further reviews continue.
“The U.S. is about to have a tremendous amount of reform that’s coming down the line,” said Curaleaf CEO Boris Jordan in an interview with BNN Bloomberg on Tuesday. “That could be very profitable for those shareholders who agree to take Curaleaf stock in this transaction.”
At the same time, more states are expanding legal sales and public events such as major state fairs now feature large cannabis exhibits. These shifts increase the potential value of a larger combined company with strong American exposure.
Read more: Glass House joins Trulieve on New York Stock Exchange after rescheduling momentum
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