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StaffStaffMarch 13, 2018
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Here are the quick hits for March 13, 2018:

Aurora Cannabis

Aurora Cannabis (ACBFF) announced the grant of three permits by the Australian Government, Department of Health, for the importation of cannabis into Australia for research purposes. The Permits were granted to the Pharmacy Australia Centre of Excellence (PACE) at the University of Queensland and allow PACE to import shipments of cannabis plant material for research purposes. Aurora, in turn, has received the required Canadian permits to export the cannabis to PACE. The cannabis will be shipped from Canada by Aurora and used for PreveCeutical’s soluble gel drug delivery research program, which is being conducted by PreveCeutical’s research partner UniQuest Pty Inc. and led by PreveCeutical’s Chief Research Officer, Dr. Harendra Parekh.

Nutritional High International Inc.

Nutritional High. (SPLIF) announced it has entered into an agreement to acquire a 75% interest in cannabis producer Green Therapeutics in the State of Nevada. In conjunction with the acquisition, the company will also purchase certain lands and premises owned by Nevada-based cultivation company Meridian Companies which is utilized by Green Therapeutics. Nutritional High and Green Therapeutics have also entered into a binding lock-up agreement while purchase and sale agreements are negotiated and due diligence is completed.

Aphria Inc.

Aphria (APHQF) announced that it received a license amendment from Health Canada that provides Aphria with additional production space of 200,000 square feet, as part of its Part III expansion at its facility in Leamington, Ontario. This will more than triple the Company’s production capacity of medical cannabis from 9,000 kg annually to 30,000 kg annually.

CannaRoyalty Corp. 

CannaRoyalty (CNNRF) announced the appointment of Brent Cox to the Board of Directors of Trichome Yield Corp. a subsidiary of CannaRoyalty. Following this board appointment, the board consists of five members, four of whom are independent of CannaRoyalty. Cox is a founding partner of The Inception Companies, a private investment vehicle focused on the global cannabis market, following a number of years at The Yucaipa Companies, where he helped invest and monitor over USD$4.0 billion of private equity transactions. He currently serves on the boards of two successful vertically integrated U.S. cannabis companies, MedMen and The Pharm.

The Hydropothecary Corporation

Hydropothecary announced the addition of three new members to its management team. Roch Vaillancourt (General Counsel), Sonia Isabel (Vice-President of Sales), and Jocelyn Racine (Vice-President of Finance) bring decades of management, financial, business, and legal experience to Hydropothecary as the company strengthens its leadership in the lead-up to the legalization of adult-use recreational cannabis.

TerraTech

TerraTech (TRTC) gave a business update ahead of the company’s earnings. It read as follows:
Company secures $40 million investment, to be made in eight tranches of $5 million over 24 months. Capex to be directed toward the build out of the Company’s cultivation, extraction and retail infrastructure in California, Nevada and New Jersey Capital injection positions the Company to leverage M&A opportunities and ramp its sales and marketing strategy 1 for 15 reverse split to be effected on March 13, 2018, to position the Company for a potential uplisting.


Debra BorchardtDebra BorchardtJanuary 25, 2018
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After months of nasty fighting, Aurora Cannabis (ACBFF) and CanniMed Therapeutics (CMMDF) have finally come to friendly terms. The once-hostile takeover bid by Aurora Cannabis to acquire CanniMed has ended on friendly terms.

On Wednesday, the Special Committee of the CanniMed Board agreed to support a new offer made by Aurora to buy all outstanding shares of CanniMed not owned by Aurora. In addition, the new offer will be supported by the locked-up CanniMed shareholders representing 36% of CanniMed’s outstanding shares and by Brent Zettl, President, and CEO of CanniMed.

A High Price To Pay For Cannabis

Originally, Aurora had planned to pay $24 a share, it has now been forced to pay $43 – a 181% premium over the closing price of CanniMed Shares on November 14, 2017. It’s a 79% increase in the previous offer Cap Price of $ 24.00. The total value of the deal is now approximately $1.1 billion based on Aurora’s implied share price of $ 12.65.

According to the company statement, “The maximum amount of cash available under the amended offer will be $140 million, and the number of Aurora shares to be issued will be between approximately 72 million (assuming full cash elections) and 84 million (assuming full share elections and no cash elections). Assuming maximum cash elections, each CanniMed shareholder would receive $5.70 in cash and 2.9493 Aurora shares.”

Aurora shares fell 5% on the news of the finalized deal and were lately trading at $11.35 on the OTC Marketplace.

Newstrike Deal Is Off

During the hostile days of the attempted takeover, CanniMed had embarked on an acquisition of Newstrike Resources (NWKRF). That deal is now over. CanniMed entered into a termination agreement with Newstrike that is resulting in breakup fee payment of a $9.5 million.

Aurora had characterized the acquisition and supply agreements signed with Newstrike as “bizarre.” Questioning why CanniMed would sign a supply agreement with a company it was going to acquire. Newstrike shareholders had approved of CanniMed acquiring the company. Newstrike shares plunged 18% on the breakup news and were lately trading at $1.19.

Reuters had reported that Aurora was considering buying both companies, but that now looked to be premature.

Management Comments

“We are very pleased to have come to terms with CanniMed on this powerful strategic combination that will establish a best-in-class cannabis company with operations across Canada and around the world,” said Terry Booth, CEO of Aurora. “Market recognition of Aurora`s continued performance and strategy execution since we first announced our intention to acquire CanniMed allows us to share that benefit directly with CanniMed shareholders by increasing the offer price, as well as by offering a cash component. ”

Brent Zettl, President, and CEO of CanniMed, added, “A testament to the great team at CanniMed, this transaction clearly confirms that the Company has been highly successful in becoming a preeminent global leader in the medical cannabis industry. In this leadership position, CanniMed has provided invaluable education, resources, support and relief of symptoms for thousands of patients served around the globe.”

“This is an excellent outcome for both Aurora’s and CanniMed’s shareholders after a hard-fought and diligently negotiated process,” said Cam Battley, Aurora’s Chief Corporate Officer. “We now look forward to warmly welcoming CanniMed’s employees and forging one unified team. Together, under the Aurora banner, we’ll continue to invest in domestic and international growth, and continue executing on our strategy of building the most dynamic, innovative integrated cannabis company in the world.”

Was It Worth It?

The two sides were publicly very nasty to each during the battle leading many industry insiders to feel that there was more going on behind the scenes than the two companies let on. So, whether the companies can truly bury the hatchet will remain to be seen.

Plus, at $1 billion Aurora will need to sell a lot of cannabis to break even on this deal. Aurora says it is “on track for a total production capacity of around 200,000 kg per annum.” According to Statista, the average price Aurora gets per gram is $8. That translates to $1.6 billion a year. However, that is a total production, not just CanniMed. CanniMed is only able to grow 7,000 kg a year at this time. That’s only $56 million. Even if CanniMed can ramp up and grow more, it will be years before Aurora makes a profit on this deal.


Debra BorchardtDebra BorchardtJanuary 22, 2018
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The hostile takeover bid between Aurora Cannabis (ACBFF) and CanniMed Therapeutics (CMMDF) is looking less hostile these days. CanniMed said that it will continue discussions with Aurora as the two companies faced a 5pm deadline today. CanniMed said that the two have decided to extend their talks.

During this extension of conversation, neither of the two companies will ask for proxies from their shareholders and Aurora will hit the pause button on buying more shares of CanniMed in the open market. Both companies agree to suspend making public statements about the transaction unless it is mutually agreed. The two companies also agreed not to move forward with discussions on alternative transactions either.

CanniMed said it still plans to hold a special shareholders’ meeting for Thursday, January 25 with the cutoff for proxies on Wednesday at 10 am eastern time with regards to the Newstrike acquisition.

The History Of The Deal

Originally, Aurora Cannabis initiated a plan in November to acquire CanniMed Therapeutics for C$24 a share, which at the time was a premium price. CanniMed rejected the offer and began a campaign the fight the acquisition. A war of nasty words took place with competing press releases as each company trashed the other publicly. CanniMed then decided to acquire Newstrike Resources (NWKRF) as a way to combat the deal.

Aurora publicly stated it didn’t think the Newstrike acquisition was a good deal for CanniMed and last week CanniMed said it was postponing a shareholder vote on the deal. Newstrike shareholders had voted in favor of being acquired by CanniMed. Today it is saying the vote will still be held. One can only imagine the shareholder’s frustration as this back and forth.

Aurora Could Buy Both

Now it looks as if Aurora could end up buying both properties. This is in contrast to the original plan that a Newstrike deal with CanniMed would cause the Aurora deal to terminate. If that were to happen (Aurora buying both), Aurora would have to raise its offer price as the stock values of all three parties have risen as the hostile bid drama has played out over the past few months.

CanniMed’s Toronto shares were lately trading at C$34, popping from C$20 at the end of December. Aurora’s shares lately traded at C$13, almost doubling from C$7.74 a month ago. Newstrike shares traded in the 50 cent range a month ago and closed on Friday at C$1.47.

If all three companies combined, the valuation could put it on par with Canopy Growth (WEED), currently Canada’s largest cannabis company with a market cap of C$7 billion.

 



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