The cannabis industry is growing at a rapid rate. Canada just paved the way for recreational marijuana to be legalized by a parliamentary vote and more than 60% of Americans now live in a state that has legalized medical marijuana. In 2018, Canada is expecting record numbers from cannabis revenue. Profit projections for the country are estimated to be exceed those of beer, wine, liquor sales combined. Attempting to capitalize on this momentum, Canadian-based medical marijuana company Aurora Cannabis made a bid to merge with rival CanniMed Therapeutics.
Aurora Cannabis Attempts Malicious Takeover
To try and force a CanniMed Therapeutics merger, Aurora secretly bought up 38% of their shares. They then offered CanniMed a price of $24/share for the rest of the company and proposed that the two Canadian cannabis giants merge. After the secretive and hostile stock purchases by Aurora, the CanniMed shareholders board held an emergency meeting where the company decided to take no specific action until further review of all the options available for CanniMed.
A statement from CanniMed reminded shareholders “to take no action with respect to the Hostile Bid until such time as the Board can make a recommendation.” To determine what they will do moving forward, CanniMed formed a special committee to weigh Aurora’s offer.
If the Aurora-CanniMed merger is completed, it would be the largest merger ever for the cannabis industry. The offer by Aurora values CanniMed at nearly $500 billion dollars, according to Business Insider. The combined value of the merger would be $2 billion.
What Would This Massive Cannabis Merger Mean
Merging with Aurora would be a wise decision for CanniMed. In the first half of the 2017 fiscal year, CanniMed reported a net loss of $4 million. It is likely that as Canada marijuana becomes legal recreationally, mega companies like Aurora could force smaller, struggling companies like CanniMed to sell at a lower price than Aurora is currently offering.
For Aurora Cannabis, the merger would only be small part of their current expansion plan. They are currently in the process of constructing a new 800,000-square-foot grow facility to be completed by mid-2018. The state of the art automated growing facility will be capable of producing more than 1,750,000 pounds of dried cannabis annually. In terms of growing capacity, the facility will significantly lower growing costs and place Aurora above most of the competition.
What Else Is Aurora Planning
While Aurora’s biggest possible deal is the multi-billion dollar merger with CanniMed, they may have other acquisitions in the works. Aurora completed a $100 million financing deal earlier this month and according to one analyst, they have $340 million in cash on hand. Do not expect Aurora to stop with with the attempted acquisition of CanniMed. They should continue to work towards becoming the leader in the Canada marijuana industry.
Know Your Cannabinoids
Lane is based in Southern California and is a content curator for Medical Marijuana 411. He focuses his research into finding informative stories that can help medical marijuana patients better understand their diverse medicine.