Curaleaf Hldgs Inc. (OTCQX:CURLF) has launched a hostile bid to acquire Aurora Cannabis Inc (TSX:ACB, NASDAQ:ACB), offering Aurora shareholders a combination of Curaleaf shares and cash that values the proposal at US$4 per Aurora share, as it seeks to combine the companies’ international cannabis operations.
Under the proposed transaction, Aurora shareholders would receive 0.3463 Curaleaf shares plus US$0.75 in cash for each Aurora share. Curaleaf said the offer represents a 45% premium to Aurora’s 30-day volume-weighted average price of US$2.75, or a 110% premium when excluding Aurora’s cash and cash equivalents.
Aurora shares rose almost 21% to about $3.50 following the announcement, while Curaleaf shares gained about 6%.
No formal takeover bid has been commenced, and Curaleaf said there is no assurance that the proposed offer will ultimately be made. The company said it is making its intention public after what it described as repeated attempts to engage with Aurora’s leadership.
Curaleaf said Chairman and CEO Boris Jordan sent Aurora a formal letter of intent on June 23 outlining the proposal and offering to enter into a mutual non-disclosure agreement for reciprocal due diligence. After Aurora declined to engage on those terms, Curaleaf said it sent a follow-up letter on July 7.
“We approached Aurora privately and constructively on multiple occasion. We were very disappointed that the Board refused to meaningfully engage,” Jordan said.
“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.”
Curaleaf said the proposed combination would create a cannabis company operating across 17 countries in Europe, North America and other international markets, with more than US$1.5 billion in last-12-month revenue and nearly US$350 million in adjusted EBITDA.
The company said the transaction would combine Aurora’s EU-GMP cultivation and manufacturing capacity with Curaleaf’s EU-GMP processing capabilities and international distribution platform. Curaleaf said Aurora has more than 50 tons of annual EU-GMP cultivation and manufacturing capacity, which would complement Curaleaf’s three operational EU-GMP certified facilities in Portugal, Spain and Canada.
Curaleaf expects the combination to generate at least US$40 million in annual cost synergies, while also identifying potential benefits from changes to cultivation standards, the deployment of Curaleaf’s genetics portfolio across Aurora’s facilities and optimization of cultivation capacity across the combined footprint.
The proposal would also give Aurora shareholders exposure to Curaleaf’s US cannabis operations, with Curaleaf pointing to the potential for regulatory and industry developments in the US market.
In the event of a substantial increase in Curaleaf’s share price before the offer is taken up, the value of the consideration would be capped at US$5 per Aurora share. Curaleaf said it would adjust the number of Curaleaf shares offered so that the total consideration equals the cap price.
Curaleaf said it remains ready to engage with Aurora’s board regarding the proposed transaction and is prepared to move toward a definitive agreement.
Aurora has not publicly responded to the proposal.