Curaleaf Holdings is asking Alberta securities regulators to restrict Aurora Cannabis’ ability to issue new stock while its hostile takeover bid is outstanding, escalating a dispute over Aurora’s valuation into a fight over whether the target can continue using a financing program established months before the offer.
Curaleaf said that it applied to the Alberta Securities Commission for an expedited hearing and wants the regulator to halt further sales through Aurora’s at-the-market equity program until the takeover offer is resolved.
The bidder argues that Aurora’s continued issuance of stock has increased both the number of shares Curaleaf must acquire and the difficulty of satisfying the offer’s acceptance requirements.
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According to Curaleaf’s application, Aurora has issued approximately 2.81 million shares at an average price of US$3.04 since Curaleaf first expressed interest in a transaction in June. Curaleaf claims those issuances diluted existing shareholders by roughly 4.9% and added more than US$11 million to the aggregate value required to complete its offer.
Curaleaf further alleges that Aurora’s ATM has produced total shareholder dilution of about 10.8% since the program was launched in February.
Aurora rejected Curaleaf’s characterization, arguing that the ATM cannot reasonably be treated as a defensive response to an offer that did not yet exist when the program was established.
Aurora launched the program on February 4, authorizing the sale of up to US$100 million of common shares from treasury through Nasdaq or other US marketplaces. Its prospectus said proceeds were intended exclusively for strategic and accretive uses, including additional cultivation capacity and potential acquisitions.
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Curaleaf formally launched its takeover offer on August 18, more than six months later.
Aurora said Monday that the ATM has been inactive for several weeks and that it was designed to provide financing flexibility for acquisitions and international growth rather than to obstruct Curaleaf. Aurora also pointed to recent UK acquisitions as an example of how proceeds from the program have been deployed.
Aurora maintained that its board should retain the ability to use the program when directors determine doing so is in shareholders’ interests.
Curaleaf’s August 18 offer provides Aurora shareholders with US$0.75 in cash and 0.3463 Curaleaf shares for each Aurora share tendered.
At launch, Curaleaf valued the consideration at approximately US$4.00 per Aurora share based on Curaleaf’s August 10 closing price. The share component is subject to adjustment if Curaleaf’s trading price rises sufficiently, with total consideration capped at US$5.00 per Aurora share.
The offer is scheduled to remain open until December 1 unless Curaleaf extends, accelerates, or withdraws it.
Aurora’s board has unanimously recommended that shareholders reject the bid, arguing that it undervalues the company. Its financial adviser, Fort Capital, delivered an opinion dated September 1 concluding that the proposed consideration was inadequate from a financial perspective, subject to the assumptions and limitations contained in that opinion.
The regulatory dispute is also now running in both directions. Aurora said it raised its own complaint with the ASC on September 2 regarding what it described as regulatory deficiencies in Curaleaf’s takeover bid. Aurora said those concerns remain unresolved.
