Aurora Cannabis Inc. (TSX:ACB), Canada’s second-largest marijuana producer, has finally agreed to acquire CanniMed Therapeutics Inc. (TSX:CMED) in a cash-and-stock deal worth $1.1 billion. This would create the world’s largest weed producer with a combined market cap of $7.8 billion. Canopy Growth Corp. (TSX:WEED), currently the biggest producer, has a market cap of $6.9 billion.
This deal follows months of negotiations between the companies following Aurora’s hostile bid to acquire CanniMed back in November 2017. The original offer was $24 per CanniMed share.
The acquisition by Aurora would value each CanniMed share at $43 each, which is a 79% premium over the original offer and 181% over CanniMed’s share price at that time.
Cannabis companies have been busy over the past year in consolidating the market ahead of this summer’s looming legalization in Canada. For example, CanniMed itself has been involved with an M&A deal with Newstrike Resources Ltd. (TSX-V:HIP). The deal between Aurora and CanniMed is now the biggest M&A of the cannabis industry to date.
Through acquiring CanniMed, Aurora looks to boost its domestic growth capacity to meet the rising demand for marijuana. It also seeks to improve its distribution network around the world as more countries approve marijuana use.
According to Chris Damas, editor of the BCMI Cannabis Report:
“CanniMed has patents, they have relationships with different universities, research and clinical trials, and export relations with other countries, and Aurora wants to add to their own relationships in Europe.”
Commenting on the CanniMed acquisition, Aurora CEO Terry Booth stated:
“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.”
Following the announcement of the merger, CanniMed shares jumped by as high as 23%. For the past three months, the stock went up close to 270%.
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