Aurora Cannabis Inc. would pay with its own shares
- Terms: 4.52586207 Aurora Shares for each CanniMed Share, subject to a maximum of $24.00.
- Aurora Cannabis Inc. has a market cap. of CAD$2.71 billion and an EV of CAD$2.58 billion.
- CanniMed Therapeutics Inc. has a market cap. of CAD$468.14 million and an EV of CAD$434 million.
- The premium is large, 56.9% over the closing price of CanniMed Shares on November 14, 2017
- The offer will be valid until March 9, 2018.
- CanniMed Therapeutics Inc. urged shareholders to take NO action. The bid was said to be “hostile.” A Special Committee is working with the target.
- “The bid price referenced in the Hostile Bid is misleading in this context and there does not appear to be any premium in the offer for CanniMed shareholders when you adjust for Aurora’s recent share price increase. We further note that the bid price is capped at $24.00 but there is no lower limit, should Aurora’s share price weaken ” said John Knowles, CFO of CanniMed.
We believe that this is only the beginning and encourage readers to follow the negotiations.
VANCOUVER , Nov. 24, 2017 /CNW/ – Aurora Cannabis Inc. (the “Company” or “Aurora”) (ACB.TO) announced today that, further to its press release of November 17, 2017 , it has formally commenced its offer (the “Offer”) to purchase all of the issued and outstanding common shares (the “CanniMed Shares”) of CanniMed Therapeutics Inc. (“CanniMed”) (CMED.TO) for consideration consisting of common shares of Aurora (the “Aurora Shares”).
Notice and advertisement of the Offer was placed in the November 24, 2017 edition of the Globe & Mail, and a takeover bid circular will be mailed to CanniMed shareholders. In addition, Aurora will file the offer and takeover bid circular and related documents (the “Offer Documents”) on SEDAR. The Offer Documents will also be available on Aurora’s website at www.auroramj.com and shareholders are invited to visit cannimed.auroramj.com for further information.
The price being offered by Aurora for each CanniMed Share, which would currently be equivalent to the Cap Price (as such term is defined below) of $24.00 payable in Aurora Shares given Aurora’s closing share price of $6.42 on November 22, 2017 , represents a compelling premium of 56.9% over the closing price of CanniMed Shares on November 14, 2017 (the last day prior to the public disclosure of Aurora’s intention to pursue a combination with CanniMed), and a 74.7% premium over the volume weighted average price (“VWAP”) for CanniMed Shares for the last 20 trading days ended November 14, 2017 .
Terms of the Offer
The Offer will provide holders of CanniMed Shares with 4.52586207 Aurora Shares for each CanniMed Share, subject to a maximum of $24.00 (the “Cap Price”) in Aurora Shares. If, on the earlier of the expiry time of the Offer and the date on which all conditions to the Offer have been satisfied, the 20-day volume weighted average price (the “Calculation Date VWAP”) of Aurora Shares traded on the TSX is greater than $5.30 per Aurora Share , the number of Aurora Shares that a holder of CanniMed Shares will receive will be calculated by dividing the Cap Price of $24.00 by the Calculation Date VWAP.
The Offer will be remain open for acceptance until 11:59 p.m. (Pacific time) on March 9, 2018 . Subject to applicable securities laws, the deposit period may be extended, or in certain circumstances reduced, by Aurora. In light of CanniMed’s proposed alternative transaction with Newstrike Resources Ltd. (the “Newstrike Resources Alternative Transaction”), Aurora has applied to the Financial and Consumer Affairs Authority of Saskatchewan and the Ontario Securities Commission to obtain an order reducing the minimum deposit period for the Offer in order to allow CanniMed’s shareholders to consider the Offer concurrently with the Newstrike Resources Alternative Transaction. CanniMed shareholders are advised, however, that there is no assurance such relief will be obtained.
Response of CanniMed Therapeutics Inc.
SASKATOON, Saskatchewan–(BUSINESS WIRE)–CanniMed Therapeutics Inc. (“CanniMed” or the “Company”) (TSX: CMED) urges shareholders to take NO action in response to Aurora Cannabis Inc.’s (“Aurora”) unsolicited offer to acquire all of the outstanding shares of the Company for consideration consisting of common shares of Aurora (the “Hostile Bid”).
As previously announced, CanniMed has formed a special committee of independent directors (the “Special Committee”) to consider the Hostile Bid. The Special Committee is reviewing the Hostile Bid, in consultation with its legal and financial advisors, and will respond in due course.
“We are very concerned that Aurora’s offer to our shareholders is based on an inflated Aurora share price, that has enjoyed a recent and significant run up in value that does not appear to be based on any substantive decisions or value created by its management,” said John Knowles, CFO, CanniMed. “The bid price referenced in the Hostile Bid is misleading in this context and there does not appear to be any premium in the offer for CanniMed shareholders when you adjust for Aurora’s recent share price increase. We further note that the bid price is capped at $24.00 but there is no lower limit, should Aurora’s share price weaken.”
“The Aurora management team has not demonstrated an ability to execute competently and consistently and there is serious concern that the Aurora share price will drop just as quickly as it has risen. There is no credible plan to deliver long term value to shareholders,“ said Brent Zettl, President and CEO, CanniMed. “In contrast, shareholders have an attractive and accretive transaction available to them now as CanniMed and Newstrike are extremely well positioned to deliver significant shareholder value going forward. As evidenced by the Health Canada regulatory directive announced on November 21, 2017, the clear drivers of greatest value will be branding and offering value added oil derivative products to the recreational market, two metrics where the CanniMed and Newstrike team are truly well positioned. The economics, particularly for the oils derivative products, are truly enormous,” continued Mr. Zettl.
CanniMed’s acquisition of Newstrike creates a premier global cannabis company. CanniMed, with 16 years of pharmaceutical cannabis cultivation experience with zero recalls or product shortages, married with Newstrike and Up Cannabis (in partnership with the iconic The Tragically Hip), will be well positioned with innovative, high quality products, two top tier distinct brands and a state-of-the-art infrastructure capable of capitalizing on key product trends, including the significant interest and uptake of cannabis oil derivatives such as vaporizer cartridges, and emerging drivers of growth in both the medical and recreational markets. The new company will have improved operational scale with a targeted 45,000 kg of capacity by 2019, improved capital markets presence and a pro-forma capitalization exceeding $600mm.
Mr. Zettl continued, “The only certainty for CanniMed shareholders is in the attractive and accretive Newstrike acquisition before them. We can understand why a deal with CanniMed makes sense for Aurora but it makes no sense for our shareholders.”
The Company is considering the appropriateness and legality of the irrevocable lock up agreements that Aurora obtained from shareholders in connection with the Hostile Bid. Such lock-up agreements, together with Aurora’s attempts to have the securities regulators shorten the 105 day minimum deposit period for the Hostile Bid, are unfair and coercive to the Company’s other shareholders and are an attempt to preclude such Company shareholders from having an effective voice in choosing the Newstrike transaction.
The Company has not received a copy of Aurora’s application to the securities regulators on this matter but believes that there is no basis for such application and intends to vigorously oppose it.
Shareholders are advised to take NO action on the Hostile Bid until they have received further communication from the Special Committee or the Board. Further details will be provided to shareholders as soon as practical.
Shareholders with questions should call CanniMed’s strategic shareholder services advisor, Kingsdale Advisors, at 1-888-518-1554.
Kingsdale Advisors is acting as strategic shareholder and communications advisor. AltaCorp Capital Inc. is acting as financial advisor to the Board and Borden Ladner Gervais LLP is acting as legal advisor to the Board. Cormark Securities Inc. is acting as financial advisor to the Special Committee and Stikeman Elliott LLP is acting as legal advisor to the Special Committee.