Aurora Cannabis Inc. has announced that it will evaluate an offer from a U.S. cannabis firm seeking to acquire the Edmonton-based company.
The company revealed it is establishing a special committee to assess the unsolicited bid on Tuesday, shortly after Curaleaf Holdings Inc. disclosed its intent to propose a purchase of all shares from its target.
According to Curaleaf, if the acquisition is successful, it would result in a merged cannabis entity with operations spanning 17 nations across Europe, North America, and other global markets.
Based in Stamford, Connecticut, Curaleaf, which is listed on the Toronto Stock Exchange, made its intentions public after several unsuccessful attempts to negotiate privately with Aurora’s management.
Curaleaf stated that Aurora’s board had declined to engage in discussions following a formal letter of intent sent by CEO Boris Jordan on June 23 that detailed the acquisition proposal. After sending a follow-up letter on July 7, Curaleaf indicated that Aurora had been “unwilling to engage in constructive discussions” since then.
“We are quite disappointed that the board did not engage meaningfully. We will now present our proposal directly to Aurora shareholders because the premium is substantial, the strategic reasoning is strong, and further delays are unwarranted,” Jordan expressed in a news release.
“Curaleaf is still prepared to engage constructively with Aurora’s board to facilitate this value-maximizing transaction, and we are ready to move swiftly towards a definitive agreement.”
Curaleaf has suggested offering Aurora shareholders $4 US per share, in addition to $0.75 US cash for each Aurora share.
Aurora confirmed it had received letters from Curaleaf on June 23 and July 7, which included proposals to acquire shares. However, the company stated that only the July 7 letter contained any financial terms, and it did not specify the combination of cash and shares proposed by Curaleaf.
Aurora also contested Curaleaf’s assertion that it refused to engage with the offer.
The Canadian cannabis firm indicated that its lead independent director had communicated with Curaleaf’s CEO as recently as July 24, emphasizing that Aurora is “focused on continuing to execute its business plan in the short to medium term and did not discourage ongoing dialogue between the two parties moving forward.”
Aurora is now set to create a special committee of independent directors to evaluate the proposal and determine whether it serves the best interests of its stakeholders.
It cautions that it cannot assure a deal will be finalized and will continue its standard operations in the meantime.
While Curaleaf’s interest in pursuing a bid is seen as promising, analysts from TD Cowen, Derek Lessard and Ryan Neal, stated that the offer currently “undervalues the long-term potential of Aurora’s business.”
“We believe that the proposed consideration fails to adequately reflect Aurora’s long-term intrinsic value,” they commented.
“We maintain that [Aurora’s] leadership in medical cannabis, its high-quality product range, strong balance sheet, and proven ability to navigate complex international regulations position the company to generate significantly greater value in the future.”
Jordan stated that merging the two companies would “unlock value” by integrating Curaleaf’s global distribution network with Aurora’s prominent international medical cannabis operations and its cultivation and manufacturing capabilities.
The companies reportedly generated over $1.5 billion US in combined revenue in the past year, and Curaleaf anticipates that the proposed acquisition could yield at least $40 million US in annual cost synergies.
“We believe this merger offers a win-win situation for both Curaleaf and Aurora shareholders,” Jordan remarked.
“Our offer presents Aurora shareholders with a unique chance to be part of a more diversified global platform and enhance their exposure to favorable U.S. regulatory trends.”
