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The type of deals done by cannabis companies continues to expand, now with Aphria acquiring all issued and outstanding common shares of Nuuvera, a global scale producer based in Canada.
The blockbuster transactions continue in the cannabis space, with Aphria (TSX:APH; OTC:APHQF)’s acquisition of Nuuvera (TSXV:NUU) being the latest, announced on Monday (January 29) for $826 million.
This buyout comes on the heels of fellow LP Aurora Cannabis (TSX:ACB; OTCQB:ACBFF) completing its acquisition of CanniMed Therapeutics (TSX:CMED) for nearly $1.1 billion last week.
According to a joint statement, Aphria will now take command of Nuuvera’s international options, expanding the depth of its international reach. This move comes in the wake of experts predicting the potential for more mergers and acquisition taking place throughout 2018.
“The transaction provides our shareholders with significant value for their investment in Nuuvera and the opportunity to participate in the significant upside of the combined company,” Lorne Abony, CEO of Nuuvera said.
Terms of the buyout from Aphria
Aphria will buy all of Nuuvera’s issued and outstanding common shares, at a price of $8.50 per share. “Nuuvera shareholders will receive $1.00 in cash plus 0.3546 of an Aphria share for each Nuuvera share held which,” the release said.
According to the companies, the buyout will reduce costs from their already established partnership through offtake agreements. On January 11, Aphria and Nuuvera revealed they were in discussions for one of these deals for 60,000 kilograms of cannabis production.
Nuuvera is a smaller producer with intentions on the global cannabis market, counting opportunities in Germany, Israel, and Italy. Its play for the Italian market expanded this month when the company acquired one of the seven licenses to import medical cannabis into the country.
Canadian cannabis market at an international level
With the expected increase in demand for marijuana, Canadian cannabis producers with established business paths are seeking new means of production to meet the interest of in cannabis products, with the recreational legalization of the drug is slated for summer 2018.
On an international level, The international options are opening up for Canadian LPs as well. As companies continue their development plans, markets that are just starting to take off are looking to Canadian producers for guidance and leadership.
Despite the growing excitement for the Canadian cannabis market, both recreational and medical, some companies have started looking beyond that for their overall growth.
According to Bloomberg, Vic Neufeld said in a call with investors, the hope is to have 20 countries under license in a year’s time.
Investor Takeaway
Following the announcement, Nuuvera’s share price rose over 10 percent. On Monday the company closed with a value of $7.73 per share, representing a 10.43 percent increase. This year Nuuvera’s share price has been struggling; at market close on Friday (January 26), its share price had decreased 54.18 percent.
Tim Seymour, a managing partner with Triogem Asset Management tweeted on Monday this deal could open the doors to Aphria having the largest global “footprint.”
Aphria Nuuvera 886m CAD deal mean they may soon have largest global #cannabis footprint with heavy EU/EMEA exposure on top of NA #CannabisCommunity
— Tim Seymour (@timseymour) January 29, 2018
During an analyst panel at the Cannabis Lift Expo in Vancouver, the group of experts discussed how merger and acquisition activity in this market could ramp up in 2018. It will be key for investors to keep track of what companies continue their acquisitions.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.