Canadian cannabis producer Aurora’s $1.1bn acquisition of rival CanniMed Therapeutics on Wednesday will create a global pot behemoth as the legalization of recreational-use of marijuana takes hold.
The deal is the largest yet in Canada’s hot cannabis industry, which has seen stocks soar in anticipation of Canada’s legalization of marijuana for recreational use later this year, and creates one of the largest producers of cannabis in the world alongside competitor Canopy Growth.
Under the terms of the deal, Aurora agreed to pay $43 in cash and shares for each CanniMed share, nearly double its original offer in November.
“We are very pleased to have come to terms with CanniMed on this powerful strategic combination that will establish a best-in-class cannabis company with operations across Canada and around the world,” Aurora chief executive Terry Booth said in a statement.
Canada is expected to pass legislation to legalize recreational-use marijuana effective July 1, but complications in setting up distribution and effective controls could delay the launch.
In the lead-up, the sector has seen frenzied activity. The market capitalization of the three largest Canadian producers of medical marijuana, for example, has exploded in recent months, fuelled by the prospect of growth.
In one year, the Aurora shares on the Toronto Stock Exchange increased sixfold, while CanniMed, Canopy Growth and Aphira shares rose fourfold.
These valuations, whose sustainability remain in doubt, illustrate a growing interest for the soft drug, which could also be a tax manna for Canada and other jurisdictions -- including six US states -- that have moved to legalize cannabis.