Cannabis investors have been watching the showdown of statements between two major producers in the Canadian market.
Cannabis investors have been watching the showdown of statements between two major producers in the Canadian market. It all started when Aurora Cannabis (TSX:ACB) made public its takeover offer CanniMed Therapeutics (TSX:CMED) in November 2017.
The two companies have been butting heads ever since then, and now CanniMed’s announcement on Tuesday (January 2) of a new supply agreement with Up Cannabis, a Newstrike Resources (TSXV:HIP) company is causing a new dispute. The collaboration is meant to help with the “surging domestic and international demand” on products from CanniMed’s catalog.
This new deal caused an uproar with Aurora, describing the move as “bizarre” and calling into question the decision to pick Up Cannabis specifically when looking for cannabis production partners.
“If CanniMed needed to purchase wholesale product, they could easily have signed a supply agreement with any number of producers currently licensed to sell,” Cam Battley, Executive Vice President of Aurora said in the company’s statement.
Aurora nearly demanded CanniMed release the exact terms of this agreement, including the amount paid for the supply agreement and expected delivery times.
What appears as a plea to its investors, the management team of CanniMed outlined the reasons why they say the acquisition of Newstrike was more favorable than the takeover from Aurora.
“Aurora’s hostile bid is NOT driving CanniMed’s share price– it’s holding it back from going even higher!” the company claimed.
After Aurora announced its intentions to acquire the fellow LP, CanniMed’s share skyrocketed 49.73 percent. Overall, the company’s share price increased 109.77 percent in 2017.
According to a report from the Financial Post shareholders of Aurora are set to vote on January 15, deciding whether or not to issue the shares needed for the takeover offer. Newstrike and CanniMed will hold their own meetings on their deal on January 17 and January 23, respectively.
Terry Booth, CEO of Aurora asked shareholders of CanniMed to vote against the Newstrike deal, which he said would “destroy considerable value” for them.
Aurora and CanniMed’s tumultuous history
By the end of the year, Aurora had accumulated a number of acquisitions and new partnerships. The LP is on a path of expansion and it pleaded to CanniMed investors’ that Aurora y could be part of it, whereas CanniMed management saw things differently.
“Many of CanniMed’s shareholders are telling us that our offer represents an excellent premium for their CanniMed shares, and clearly see the considerable upside potential by becoming Aurora shareholders,” Battley said in a statement.
As a means to stop the takeover, management of CanniMed sought to complete an acquisition of Newstrike, as means of a poison pill tactic. A move that Aurora criticized by calling into question the capabilities of CanniMed’s leaders. Aurora’s management has repeatedly claimed shareholders for CanniMed want their takeover to be finalized.
After the fighting grew contentious between the companies, the Ontario Securities Commission had to step in and review the case. After its initial review, the commission gave its ruling asking Aurora a more in depth disclosure of ties with people close to its takeover objective. CanniMed was also stopped from acquiring Newstrike Resources.
To finish the year Aurora announced it had purchased 450,000 shares of CanniMed at a price of $22.75 per share. This purchase was finalized after the ruling from the OSC stopped a shareholder rights plan from CanniMed preventing Aurora’s efforts.
The resolution on this fight is, at the very least, forthcoming. Aurora offered its bid had a March 2018 deadline and since the Newstrike option came up things have only complicated. Both companies have presented their cases through numerous statements and pleas to investors.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.