What?
Aurora Cannabis Inc. (TSX: ACB) and CanniMed Therapeutics Inc. (TSX:CMED) just announced that the two companies have entered a supportive agreement in which CanniMed’s board will support Aurora’s offer to acquire all of its issued and outstanding shares not already owned for a total consideration of approximately $1.1 billion.
So what?
The deal values CanniMed at approximately $43 per share, which represents a 181% premium over its closing price on November 14, 2017, the trading session prior to Aurora’s public disclosure that it would pursue a takeover of CanniMed. The deal also represents a 79% increase from its previous offer of $24 per share, which CanniMed strongly opposed, and a 14.6% premium to its closing price of $37.51 on Tuesday.
The deal comes less than a week after the two companies reached an agreement to discuss a possible transaction, which was extended twice in order to give the two management teams enough time to complete the deal it just announced.
As a part of this deal, CanniMed has entered a termination agreement with Newstrike Resources Ltd. (TSXV:HIP), which it was in the process of acquiring as a way to prevent the takeover by Aurora, and this termination will result in a $9.5 million breakup fee that will be paid to Newstrike.
Now what?
I think this is a phenomenal deal for CanniMed’s shareholders, so I would most certainly vote in favour of it.
I also think this is a phenomenal deal for Aurora, because the combination of the two companies will create a powerhouse in the cannabis industry with the size and scale to compete with the other powerhouses, Canopy Growth Corp. and Aphria Inc.
With all of this being said, I think Foolish investors seeking exposure to the high-growth cannabis industry should strongly consider beginning to scale in to long-term positions in Aurora, Canopy, or Aphria over the next couple of weeks.
