Aurora Cannabis, one of Canada’s largest licensed weed producers has scooped up rival cannabis producer MedReleaf in a $3.2 billion all-stock deal that sets the stage for Aurora to become the world’s biggest legal weed producer.
Combined, Aurora and MedReleaf have the funded capacity to produce 570,000 kg per year of cannabis through nine facilities in Canada and two in Denmark, far surpassing the likes of Canopy Growth Corporation, the country’s biggest weed producer which is currently licensed to produce 31,000 kg of weed and weed-related products.
“This transaction, upon completion, will make Aurora the largest cannabis company in the world by funded capacity, market capitalization and revenue,” Cam Battley, Aurora’s Chief Corporate Officer told VICE Money.
“This deal has been in the works for a very long time. Of all the companies in the sector, these are the two that most belong together because of high production efficiency and superior technology, ” Battley said.
"MedReleaf was founded on the belief that by striving to be the Medical Grade Standard and bringing the highest level of quality and rigor to the cannabis industry, we would produce safe, consistent, and effective products that help improve the quality of life of our patients,” MedReleaf CEO Neil Closner said in a press statement.
“By combining with Aurora, an integrated producer with an exceptionally strong track record for execution, and deep domestic and international distribution capabilities, we will be ideally positioned to set the global standard for our industry at a pace that will be difficult to match."
At a press conference Monday morning, Aurora CEO Terry Booth said that the acquisition of MedReleaf has a "long-term global strategy in mind", specifically the goal of capturing the European cannabis market. In Germany, medical cannabis in government-insured, meaning that patients get their weed costs covered by the state.
Aurora will buy MedReleaf’s shares for $29.44 per share, 18.2 percent more than the company’s Friday closing price. When the deal is done, Aurora shareholders will end up owning roughly 61 percent of the new combined company.
“MedReleaf’s shareholders will be getting a healthy premium. We believe this development will spark M&A enthusiasm across the sector,” Beacon Securities analyst Vahan Ajamian wrote in a note.
This is the second time in the last six months that Aurora has gone on a buying spree — earlier this year, the company bought Saskatchewan-based CanniMed Therapeutics for $1.1 billion after a fraught negotiation that at one point became a hostile takeover.
There are currently 104 licensed weed producers in Canada, and 31 that are publicly-traded. Analysts and industry experts have long predicted that only a few companies will end up emerging profitable, as most weed companies are still struggling to search for capital to build up growing capacity ahead of legalization.
“What we’re seeing here is a coming of age moment for the cannabis industry,” Battley said.
“This is the launch of a cannabis company dedicated to low production costs and high quality product.”