Aurora Cannabis Inc. (ACBFF) is taking its hostile takeover of CanniMed Therapeutics (CMMDF) to the shareholders after being ignored by the CanniMed board. Aurora is offering C$24.00 per CanniMed share for a 56.9% premium over the closing price before Aurora began its takeover attempt. Aurora says it has locked up three of the company’s largest shareholders representing 38% of the company’s shares.
The CanniMed shareholders don’t exactly receive C$24 per share, instead, they would get 4.52586207 Aurora shares for each of their CanniMed shares. This valuation is based on Aurora’s closing share price on November 17, 2017. Aurora’s stock is down from a 52-week high of C$6.90 and the stock has fallen since the announcement of the desire to acquire CanniMed. CanniMed’s stock popped from the C$15 range prior to the takeover announcement to lately trading at approximately C$19.32.
“While we have attempted to engage and have a constructive dialogue with CanniMed’s Board and management about the strong merits of our offer, their refusal to enter into such a discussion, along with the powerful strategic rationale for the combination, leaves us no recourse at this point but to launch a formal offer for the company,” said Terry Booth, CEO of Aurora. “We believe that CanniMed shareholders would benefit greatly from a combination, not only through the very significant premium we are offering for their shares, but also by participating in Aurora’s continued growth, which is well above our industry peers, and is based on superior business strategy and exceptional, industry-leading execution. We already have the support of a large percentage of CanniMed shareholders, and look forward to bringing this process to a positive conclusion for the benefit of our combined shareholders.”
The move began on November 13, when Aurora contacted the board of directors at CanniMed to propose a merger. According to Aurora, the board failed to respond by the proposed deadline and so Aurora decided to approach the shareholders directly.
CanniMed Fires Back With Its Own Merger Plans
CanniMed decided instead to announce a merger with Newstrike Resources, the parent company of Up Cannabis Inc. on the 17th of November. Under this agreement, Newstrike shareholders would receive 0.033 shares of CanniMed for each Newstrike share for a value of approximately C$0.505 per share. Following the deal, Newstrike would become a wholly-owned subsidiary of CanniMed.
The board of CanniMed is urging shareholders to vote in favor of the Newstrike deal, while stating on November 15th that Aurora had not made a formal offer for the CanniMed shares. They said to take no action on the unsolicited proposal. In a statement, the company said, “The Newstrike acquisition is accretive and is a highly strategic entry into the recreational cannabis market and the terms of any Aurora offer are unknown, whereas the transaction with Newstrike has been fully negotiated and contains only reasonable conditions to closing. CanniMed will respond to the Aurora proposal if a formal offer is made.”
Aurora countered in its statement, “In entering into the highly conditional agreement, CanniMed has agreed to pay a $9.5 million termination fee to Newstrike Resources should a superior proposal, such as the Aurora Offer, emerge. The termination fee, if paid, represents approximately $0.41 cash per share loss to CanniMed shareholders.” Aurora also fired back that the terms of the offer were in fact known as it gave detailed terms to the board in a proposal dated November 13. They argue that the Newstrike deal is oppressive to CanniMed shareholders. However, Aurora does concede in its statement that it has not commenced the offer, only made its intention to do so and could potentially not move forward. Aurora is working with Canaccord Genuity on the deal.
Board Member Resigns Ahead Of Conference Call
In addition to the news of the Newstrike merger, CanniMed also announced on Monday that Mr. Rob Duguid has resigned from the Board of Directors. He had been a board member since 2001. CanniMed is also hosting a conference call to discuss these matters on Monday at 10:00 am eastern.