Curaleaf Holdings (TSX: CURA) is going over the heads of Aurora Cannabis’ (TSX: ACB) board.
The company said it intends to launch a formal takeover bid for Aurora, offering US$4.00 per share in cash and stock to fold the Canadian medical producer into what Curaleaf bills as the cannabis industry’s first global platform.
Each Aurora share would be exchanged for 0.3463 Curaleaf subordinate voting shares plus US$0.75 in cash. That works out to a 45% premium to Aurora’s 30-day volume-weighted average price of US$2.75, or 110% once the company’s balance sheet cash is stripped out. Depending on where Curaleaf’s own stock trades, the consideration could stretch as high as US$5.00 per share under a cap tied to a 20-day VWAP, lifting the premium to 82%, or 197% excluding cash.
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The bid would remain open for 105 days once commenced, with the option to extend. There are no due diligence or financing conditions attached. Offer documents are to be filed with Canadian securities regulators and the U.S. Securities and Exchange Commission.
The rationale is part geography, part arithmetic. Together, the two companies would operate across 17 countries with roughly US$1.5 billion in trailing twelve-month revenue and close to US$350 million in adjusted EBITDA, at a pro forma market capitalization near US$3.0 billion. Aurora brings more than 50 tons of annual EU-GMP cultivation capacity; Curaleaf brings the processing, distribution and retail reach to move it. Management pegs cost synergies at a minimum of US$40 million annually, with revenue gains on top of that.
Then there is the American angle. Aurora shareholders would pick up exposure to a US$32 billion U.S. cannabis market that Curaleaf argues is finally seeing regulatory tailwinds.
“We believe this combination represents a win-win for Curaleaf and Aurora shareholders,” said Boris Jordan, chairman and chief executive officer. “We approached Aurora privately and constructively on multiple occasion… We were very disappointed that the Board refused to meaningfully engage.”
Those approaches began with a formal letter of intent on June 23, followed by a second letter on July 7 after Aurora’s leadership declined to enter discussions.
“We will now take our proposal directly to Aurora shareholders because the premium is significant, the strategic rationale is compelling, and further delay is unjustified,” Jordan said, adding that Curaleaf “remains ready to engage constructively with Aurora’s Board to advance this value-maximizing transaction.”
Curaleaf has reserved the right to abandon the bid if Aurora adopts defensive tactics, such as a shareholder rights plan, a major asset sale, a sizable acquisition, a significant share issuance, or agrees to a competing transaction.
Curaleaf last traded at $1308 on the TSX.
