Every week it seems there is a new twist and turn to the Aurora Cannabis (ACBFF) hostile takeover of CanniMed Therapeutics (CMMDF). Yesterday after the market close, Aurora announced it acquired an additional 116,000 shares of CanniMed in the open market. Today it appealed to CanniMed’s shareholders by characterizing the latest Newstrike supply agreement as ‘bizarre.’
In a no-holds-barred comment Cam Battley, Executive Vice President of Aurora said, “Simply put, this is a bizarre action by CanniMed management. Why would CanniMed sign a supply agreement with a company they have proposed to acquire in three weeks? Why would they sign a supply agreement with a company that doesn’t have a sales license, and therefore has no ability to fulfill the agreement? If CanniMed needed to purchase wholesale product, they could easily have signed a supply agreement with any number of producers currently licensed to sell. CanniMed has never previously entered into a wholesale supply agreement, nor ever indicated that they needed additional supply. So it’s reasonable to ask whether their announcement actually meets the definition of a supply agreement as commonly understood – or whether it represents a disguised scheme to achieve other objectives.”
CanniMed never wanted to be acquired by Aurora and has also made comments questioning Aurora’s success. The company has adopted poison pills to fight the deal, which Aurora has been very quick to expose and counter.
Battley went on to add, “It’s clear based on publicly disclosed information that Newstrike is in urgent financial need. Is this an attempt to transfer CanniMed capital sufficient to keep the lights on and the doors open at Newstrike? Alternatively, is this an attempt to entrench a relationship between CanniMed and Newstrike under adverse terms that are counter to the interests of CanniMed shareholders, as the latest attempt at creating a poison pill? Given that CanniMed shareholders are due to decide in the next few weeks on both the proposed CanniMed-Newstrike transaction and the Aurora Offer to acquire CanniMed, Aurora believes it is incumbent on CanniMed management to disclose the terms of the supply agreement they have signed with Newstrike’s Up Cannabis subsidiary.”
Aurora made it clear it wants CanniMed to disclose the terms of the supply agreement. Battley said the agreement warrants disclosure as a material agreement through Sedar (the U.S. equivalent of the Securities and Exchange Commission). He wants to know what price the product will be purchased at, the expected timing of deliveries under the agreement, what the conditions are for the renewal of the agreement, and how it can be terminated. That said, if Aurora does acquire CanniMed it plans to terminate the agreement.
Aurora Keeps Buying Shares Of CanniMed
Aurora acquired 116,000 shares of CanniMed on December 29 in the open market with the highest price paid per share at C$24. The company has acquired 566,000 shares at an average price of C$22.82 through the Toronto Exchange. CanniMed has over 19 million shares outstanding according to the exchange company listing bringing Aurora’s ownership to approximately 2.85%. CanniMed shares have traded in a 52-week range of $5.66 to $18.61 on the OTC Marketplace and were lately trading at $19.32 as investors have seen their shares rise on the two companies engage in a very public battle.
Aurora’s stock has also popped on the war of words. Its shares on the OTC Marketplace have run up to $8.38 and were lately trading at $10.70. The company also announced on January 2, that its liquid assets exceeded C$500 million. It stated that “For the month of November 2017, Aurora achieved record net cannabis revenues of $3.1 million, based on sales of 354,000 grams or gram equivalents in Canada and through the Company’s wholly owned German subsidiary Pedanios.”
Ultimately, it will be up to the CanniMed shareholders as to whether they vote to be acquired by Aurora and after this bloody battle, it will certainly be a bittersweet victory if Aurora wins.