Edmonton-based Aurora Cannabis Inc. closed the sale of its 1.6-million square-foot Medicine Hat greenhouse, known as the Aurora Sun Facility, to Bevo Farms, a large North American supplier of propagated vegetables and ornamental plants, the company announced Monday.
The move is part of Aurora’s (Nasdaq: ACB) (TSX: ACB) ongoing strategy to improve cash flow and further solidify its controlling interest in Bevo, following a $45 million investment for a 50.1% stake in Bevo last year.
Under the terms of the agreement, Bevo Farms could pay up to $15 million to Aurora over time if specific financial milestones at the Aurora Sun Facility are met. The price tag is a fraction of the $200 million Aurora funneled toward building the greenhouse.
Still, the transaction is seen as a win-win for both companies.
“Bevo’s acquisition of the Aurora Sun facility further demonstrates the close synergies between our companies and the value that our partnership creates for shareholders,” Aurora CEO Miguel Martin said in a statement.
The sale is expected to reduce Aurora’s annual carrying costs by approximately $2 million. Additionally, the move could accelerate Bevo’s plans to boost revenue and earnings, with the results being fully consolidated in Aurora’s financial reports due to its controlling stake in the company.
The sale follows an agreement last year for Bevo to acquire the Aurora Sky greenhouse in Edmonton for up to $25 million. Bevo planned to repurpose the facility for orchid cultivation and vegetable propagation, adding to its established distribution reach and bolstering its core operations.
With the myriad of challenges faced by the legal cannabis industry across North America, these type of deals are expected to help streamline operations and tap into new avenues for growth. Aurora is expected to maintain its focus on Bevo’s customer base and potentially extend Bevo’s operations into Alberta.