Aurora Cannabis Inc. has disclosed its willingness to review a bid from a U.S.-based cannabis company interested in acquiring the Edmonton-headquartered company. The announcement of forming a special committee to evaluate the unsolicited offer was made by Aurora shortly after Curaleaf Holdings Inc. unveiled its intentions to acquire all outstanding shares of Aurora.
If successful, the acquisition would result in the formation of a merged cannabis entity with operations in 17 countries spanning Europe, North America, and other global markets, according to Curaleaf. The Stamford, Conn.-based company, listed on the Toronto Stock Exchange, declared its public proposal after unsuccessful private negotiation attempts with Aurora’s management.
Curaleaf claimed that Aurora’s board declined to engage in discussions following the submission of a formal letter of intent by Curaleaf’s CEO, Boris Jordan, on June 23. Despite sending a subsequent follow-up letter on July 7, Aurora allegedly showed reluctance to participate in constructive talks.
Expressing disappointment at Aurora’s lack of engagement, Jordan stated in a press release that they would now present the proposal directly to Aurora shareholders due to the perceived significant premium and compelling strategic rationale of the offer.
Curaleaf proposed a payment of $4 US per share to Aurora shareholders, in addition to $0.75 US in cash for each Aurora share. However, Aurora clarified that while it received letters from Curaleaf outlining acquisition proposals on June 23 and July 7, only the latter included specific financial terms without detailing the cash and share mix.
Contrary to Curaleaf’s assertion of refusal, Aurora emphasized that its lead independent director had corresponded with Curaleaf’s CEO as recently as July 24, expressing a focus on continuing its business plan in the short to medium term and not discouraging ongoing dialogue.
Aurora intends to establish a special committee comprising independent directors to assess the proposal’s alignment with stakeholders’ best interests. The company cautioned that a deal was not guaranteed, and operations would continue as usual during this period.
Although acknowledging Curaleaf’s interest as positive, analysts Derek Lessard and Ryan Neal from TD Cowen expressed reservations about the current offer undervaluing Aurora’s long-term potential. They highlighted Aurora’s market leadership in medical cannabis, robust product portfolio, strong financial position, and adeptness in navigating global regulatory frameworks as factors contributing to its significant long-term value creation potential.
Jordan emphasized the merger’s value proposition, emphasizing the synergy between Curaleaf’s global distribution network, Aurora’s international medical cannabis expertise, and production capabilities. The combined revenue of the two companies in the past year exceeded $1.5 billion US, with Curaleaf anticipating annual cost synergies of at least $40 million US from the proposed acquisition.
Describing the merger as mutually beneficial for shareholders of both companies, Jordan articulated the opportunity for Aurora shareholders to engage in a diversified global platform and gain exposure to favorable U.S. regulatory trends.