Canada: Cannabis Sector Deal-Making Already Off To A Hot Start In 2018

Photo Credit: CanniMed

The first week of 2018 has seen a number of deals in Canada’s cannabis industry — a busy start to a year that is expected to include the legalization of recreational pot and plenty of mergers and acquisitions in the sector in general. Here’s a round up of some of the most notable transactions from the past seven days:

Going Dutchman

On Friday, Edmonton-based Aurora Cannabis Inc. announced that it had struck a $55-million deal to buy, via private placement, an initial 17.62 per cent stake in Ancaster, Ont.-based The Green Organic Dutchman Holdings Ltd. (TGOD).

TGOD is a licensed medical marijuana producer eyeing a March 2018 initial public offering.

“Upon TGOD achieving certain corporate, operational, construction and financial milestones … Aurora shall have the option to incrementally increase its ownership interest in TGOD to 51 per cent,” the release stated.

The “milestones” to trigger the increased ownership stake are conditional on The Green Organic Dutchman listing on a stock exchange.

Aurora’s deal with TGOD also includes a supply contract that gives Aurora, one of the country’s largest licensed producers of medical marijuana, the right to buy up to 20 per cent of TGOD’s annual cannabis crop.

As well, Aurora announced Thursday that it had inked an agreement for a joint venture based in Denmark.

Chasing CanniMed

Meanwhile, Aurora made two announcements regarding share purchases related to its hostile takeover bid for CanniMed Therapeutics Inc.

On Tuesday Aurora said it had purchased 116,000 shares of CanniMed, and on Thursday that it had added another 91,800, upping its stake in the latter company to around 2.7 per cent.

Aurora’s all-stock offer values CanniMed at close to $600 million. CanniMed’s management has spurned the proposal, instead preferring to pursue an acquisition of Ontario cannabis company Newstrike Resources Ltd.

Shares of Newstrike — which did not have any revenue for the nine months ended Sept. 30, 2017, as it had yet to receive a license from Health Canada to sell medical marijuana — were up nearly 170 per cent in value for the year as of Friday’s close, finishing the day at $1.51 apiece. Newstrike said Friday that the sales license application by its wholly owned subsidiary, Up Cannabis Inc., had been approved by Health Canada.

Shareholders of Aurora, CanniMed and Newstrike will all vote later this month on the proposed deals.

Other deals

Victoria’s Emerald Health Therapeutics Inc., a licensed medical marijuana producer, said Wednesday that an unnamed, “Canadian institutional accredited investor” had agreed to buy a $25-million chunk of the cannabis company through a prospectus and secondary sale.

Also Wednesday, Leamington, Ont.-based Aphria Inc. said that it had closed a $115-million bought-deal share offering, with some of the proceeds earmarked for “strategic investments to enhance the Company’s product offerings or cultivation capabilities.”

Golden Leaf Holdings Ltd., a Canadian-based cannabis oil company with business operations in Portland, Oregon, said Tuesday that it had closed its previously announced purchase of Medical Marijuana Group Consulting Ltd., a company that “secures” medical marijuana patients and refers them to licensed producers. Golden Leaf paid $5 million in stock for MMGC.