A Historical Acquisition for the Future of the Cannabis Market

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Mergers and acquisitions in the cannabis sector are nothing new and happen quite frequently, but recent news has shown that we may be witnessing the largest acquisition the market has seen yet. The Canadian cannabis market has been a hotbed for these big moves in the past, but nothing of this scale. Two of the largest players in the market, Aurora Cannabis and MedReleaf Corp, are joining in a historic merger.

Aurora Cannabis Inc. recently announced that they would be buying their rival company MedReleaf Corp. for a large sum of around $2.3 billion in stock. The companies stated this early as of Monday, May 14th. The deal will help to cement the ability to produce as much as 570,000 kg of cannabis per year throughout several facilities in Canada and Denmark. Due to the merger, the two companies will be able to partner up for foreign markets such as South America, Australia, and Europe. This market’s are allowing the import of cannabis which is right where Aurora fits into the space.

One of the main reasons for the acquisition could be the potential legalization of recreational weed throughout the Canadian scape. Prime Minister Justin Trudeau of Canada has stated his support for ensuring cannabis legalization this summer. With two votes already down, the third vote will occur this summer which is expected to be quite positive in favor of marijuana.

Aurora has been leading the space in terms of consolidation for quite some time now. With over 10 acquisitions in the market over the past two years, it is clear that Aurora is very hungry for more growth. The CEO of Aurora, Terry Booth stated that they will continue to see consolidation in the industry from Aurora as well as other companies. He stated that “we’re not done. Over the next couple of weeks, you’ll see some more activity from Aurora.” He did not state anything regarding how large this deal with MedReleaf will become in the future, but it’s clear that given the scale of the two companies, it will be quite large.

The Chief Corporate Officer of Aurora, Cam Battley, stated that Aurora hopes to “become nothing less than the world’s largest cannabis company.” They have also stated their interest in growing throughout the European marker as well as other markets abroad.

Aurora’s stock only managed to rise by around 1% early in the trading day, while MedReleaf rose by around 2.6% early in the day. GMP Securities analyst Martin Landry stated that “the likelihood of another bidder emerging with a superior offer is low in our view, given the size of the transaction and the overwhelming support of MedReleaf’s shareholders.” He continued to state that it may be difficult for Aurora to acquire any more companies in the near future, given how large this buyout is. This is not to say that the buyout will not be profitable, but it may take some time to build up more free cash after such a large purchase.

Another deal occurred in the space as well helping to make Monday quite a day for the cannabis market. Canopy Growth Corp. stated that they would be buying a 33% stake in the greenhouse operator BC Tweed Joint Venture Inc. Canopy also said they have plans to list on the New York Stock Exchange in the near future in a separate piece of news.

The amount of cooperation in the cannabis world is helping to build it up to its full potential in the near future. The hopes are high that these acquisitions will continue to consolidate the space into a viable market for the future of cannabis.

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