Aurora Cannabis Inc. to Acquire CanniMed Therapeutics Inc. for $1.1 Billion

Aurora Cannabis Inc. (TSX:ACB) has finally reached a deal with CanniMed Therapeutics Inc. (TSX:CMED) to acquire it for approximately $43 per share. What should you do now?

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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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