TSX:ACB
TSX:LEAF
Transaction to Create Preeminent Global
Cannabis Company
EDMONTON and MARKHAM, ON, May 14,
2018 /PRNewswire/ - Aurora Cannabis Inc. ("Aurora")
(TSX: ACB) and MedReleaf Corp. ("MedReleaf") (TSX: LEAF) are
pleased to announce that they have entered into a definitive
arrangement agreement (the "Arrangement Agreement") whereby Aurora
intends to acquire all of the issued and outstanding common shares
of MedReleaf in an all-share transaction valued at approximately
C$3.2 billion on a fully diluted
basis (the "Transaction").
Proposed Transaction
Under the terms of the Arrangement Agreement, holders of
MedReleaf common shares will receive 3.575 common shares of Aurora
for each MedReleaf common share held (the "Exchange Ratio"). Upon
completion of the Transaction, existing Aurora and MedReleaf
shareholders would own approximately 61% and 39% of the pro forma
company, respectively, on a fully diluted basis.
The Exchange Ratio implies a price of C$29.44 per MedReleaf common share and a premium
of approximately 34%, based on the 20-day volume weighted average
prices of Aurora and MedReleaf common shares on the Toronto Stock
Exchange as of May 11, 2018.
Highlights of the Transaction
The proposed Transaction brings together two of Canada's premier cannabis companies with
fully-aligned strategic visions and production philosophies, as
well as complementary assets, distribution networks, products, and
capabilities. The combined company will meet what Aurora and
MedReleaf management teams consider to be the critical success
factors in the industry, creating a powerful platform for
accelerated growth on a global scale:
- Industry leading scale: the Transaction brings
together two leading operators with a total funded capacity of over
570,000 kg per year of high-quality cannabis, through nine
facilities in Canada and two in
Denmark.
- Low production costs and industry leading yields:
Aurora's automated greenhouses are expected to deliver
industry-leading efficiency and low production costs, delivering
sustainably robust margins. MedReleaf's high-yield cultivation is
expected to further enhance productivity and reduce costs across
the combined entity's facilities.
- Extensive distribution channels in Canada and internationally: the two
companies have established distribution agreements with
Alberta's Alcanna (formerly Liquor
Stores), Quebec's SAQ, Pharmasave
and Shoppers Drug Mart in Canada,
among others. Additionally, the companies have a rapidly growing
international footprint through a network of in-country sales and
distribution capabilities and supply and licensing agreements on
five continents, including countries such as Germany, Italy, Brazil
and Australia. Both companies are
actively engaged in initiatives to further expand their
international activities.
- Proven execution and agility across the value chain:
creating a combined company, fully integrated across the entire
value chain. The combined entity will be enabled to move with more
agility and speed to capitalize on diversified opportunities in
both the domestic and international markets, and create new,
higher-margin opportunities across the value chain.
- Enhanced diversification: a more broadly diversified
portfolio of award-winning high-quality flower and derivative
products will enable the companies to establish strong brands
across the various market segments.
- Brand leadership: three established medical brands,
Aurora, CanniMed and MedReleaf, coupled with a portfolio of
consumer and wellness brands - San Rafael '71, Woodstock, and AltaVie - all backed by
detailed consumer and marketplace insights and advanced analytical
frameworks.
- Innovation and R&D excellence: the expanded
scientific team will focus on developing a robust pipeline of
marketable IP, accessing higher-margin segments and new revenue
streams. Aurora's Medical Centre of Excellence, formed through the
combination of the Aurora and CanniMed science and product
development teams, together with MedReleaf's ongoing studies with
recognized research institutes, are expected to continue to evolve
product innovation and create additional momentum for brand equity
development on a global scale.
- Enhanced capital markets profile: the combined entity's
expanded capital markets profile is expected to appeal to a broader
shareholder audience, enhance trading liquidity and increase
weighting in index tracking portfolios.
"This is a transformational transaction that brings together two
pioneering cannabis companies, both committed to high technology,
high quality and low cost production, to create a powerful platform
for accelerated growth and success on a global scale," said
Terry Booth, CEO of Aurora. "Our
complementary assets, strategic synergies, and strong market
positioning will provide us with critical mass and an excellent
product portfolio in preparation for the adult consumer use market
in Canada. Equally, the
combination strengthens our capacity to service the rapidly
expanding global medical cannabis markets, and amplifies our
early-mover advantage. We are very excited about the combination of
our respective science and R&D teams, which will position us
exceptionally well for the development of high value-added
products, addressing as yet unmet needs in the medical markets, and
driving continued innovation for the adult consumer use
market."
Neil Closner, CEO of MedReleaf,
added, "MedReleaf was founded on the belief that by striving to be
the Medical Grade Standard and bringing the
highest level of quality and rigor to the cannabis industry,
we would produce safe, consistent, and effective products that help
improve the quality of life of our patients and, in time,
provide an unrivaled experience for the adult use
consumer. This, in turn, would drive growth and opportunity
for our business. By combining with Aurora, an integrated producer
with an exceptionally strong track record for execution, and deep
domestic and international distribution capabilities, we will be
ideally positioned to set the global standard for our industry at a
pace that will be difficult to match."
Board of Directors' Recommendations
The Arrangement Agreement has been unanimously approved by the
boards of directors of Aurora and MedReleaf, and each board
recommends that their respective shareholders vote in favour of the
Transaction.
The board of directors of MedReleaf and the special committee of
the MedReleaf board of directors have obtained a fairness opinion
from each of Canaccord Genuity Corp. and GMP Securities L.P. that,
as of the date of the opinions, and subject to the assumptions,
limitations, and qualifications on which such opinions are based,
the consideration to be received by MedReleaf's shareholders
pursuant to the Arrangement Agreement is fair, from a financial
point of view, to the MedReleaf shareholders. The board of
directors of Aurora has obtained an opinion from BMO Capital
Markets that, as of the date of the opinion, and subject to the
assumptions, limitations, and qualifications on which such opinion
is based, the Exchange Ratio provided for in the Arrangement
Agreement is fair from a financial point of view to Aurora.
Transaction Summary
The Transaction will be effected by way of a plan of arrangement
completed under the Business Corporations Act (Ontario). The Transaction will require
approval by at least 66 2/3% of the votes cast by the shareholders
of MedReleaf present at a special meeting of MedReleaf
shareholders. The issuance of Aurora common shares in connection
with the Transaction will require the approval of a simple majority
of the shareholders of Aurora present at a special meeting.
Directors and officers of Aurora and MedReleaf have entered into
support agreements pursuant to which they have agreed to vote their
shares in favour of the Transaction. In addition, holders of
approximately 56% of MedReleaf's issued and outstanding common
shares have entered into irrevocable hard lock-ups to vote their
shares in favour of the Transaction.
Upon completion of the Transaction, the board of directors of
Aurora will be increased to 8 members, with Norma Beauchamp and Ronald Funk, currently independent Directors of
MedReleaf, to be appointed to the board of directors of Aurora.
The Arrangement Agreement includes customary provisions
including reciprocal non-solicitation provisions, subject to the
right of each of MedReleaf and Aurora to accept a superior proposal
in certain circumstances, with both Aurora and MedReleaf having a
five business day right to match any such superior proposal for the
other party. The Arrangement Agreement also provides for reciprocal
termination fees of C$80 million if
the Transaction is terminated in certain specified circumstances,
as well as the payment of a C$15
million expense reimbursement fee if the Transaction is
terminated in certain other specified circumstances.
In addition to shareholder approvals, the Transaction is subject
to the receipt of certain regulatory court and stock exchange
approvals and the satisfaction of other conditions customary in
transactions of this nature.
Further information regarding the Transaction will be included
in the information circulars that Aurora and MedReleaf will
prepare, file, and mail in due course to their respective
shareholders in connection with their special meetings to be held
to consider the Transaction. The Arrangement Agreement will be
filed on the SEDAR profiles of MedReleaf and Aurora on the SEDAR
website at www.sedar.com.
None of the securities to be issued pursuant to the Arrangement
Agreement have been or will be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act"), or
any state securities laws, and any securities issued in the
Arrangement are anticipated to be issued in reliance upon the
exemption from such registration requirements provided by Section
3(a)(10) of the U.S. Securities Act and applicable exemptions under
state securities laws. This news release does not constitute an
offer to sell or the solicitation of an offer to buy any
securities.
Advisors and Counsel
BMO Capital Markets is acting as the exclusive financial advisor
to Aurora. McMillan LLP is acting as legal counsel to Aurora.
Canaccord Genuity is acting as the exclusive financial advisor
to the special committee of the board of directors of MedReleaf,
who also received an independent fairness opinion from GMP
Securities, and an independent financial diligence report from
Deloitte LLP. Stikeman Elliott LLP is acting as legal counsel to
MedReleaf. Davies Ward Phillips
& Vineberg LLP is acting as legal counsel to shareholders of
MedReleaf.
Press Conference and Analyst Call
Aurora and MedReleaf will hold a press conference at
10:00 a.m. Eastern time, details of
which have been disseminated via media advisory. The presentation
and multi-media assets will be available at:
https://investor.auroramj.com/#/investor-info#aurora-medreleaf
Conference Call and Webcast Access Information
Aurora and MedReleaf will host a webcast conference call,
including a slide presentation, to discuss the transaction on
Monday, May 14, 2018, at 11:30 a.m. Eastern time.
Participants may join the conference call by dialing (888)
231-8191 or (647) 427-7450.
A live webcast of the conference call, including the slide
presentation, will be available at https://bit.ly/2wB9U4z. Please
connect at least 15 minutes prior to the conference call to ensure
adequate time for any software downloads that may be required to
join the webcast. To view the webcast presentation with slides,
please choose either the Real Streaming Audio or Windows Streaming
Audio option.
About Aurora
Aurora's wholly-owned subsidiary, Aurora Enterprises Inc., is a
licensed producer of medical cannabis pursuant to Health Canada's
Access to Cannabis for Medical Purposes Regulations ("ACMPR"). The
Company operates a 55,200 square foot, state-of-the-art production
facility in Mountain View County, Alberta, known as "Aurora Mountain", and a
second 40,000 square foot high-technology production facility known
as "Aurora Vie" in Pointe-Claire,
Quebec on Montreal's West
Island. In January 2018, Aurora's
800,000 square foot flagship cultivation facility, Aurora Sky,
located at the Edmonton
International Airport, was licensed. Once at full capacity, Aurora
Sky is expected to produce over 100,000 kg per annum of cannabis.
Aurora is completing a facility in Lachute, Quebec utilizing its wholly owned
subsidiary Aurora Larssen Projects Inc.
The Company's wholly-owned subsidiary CanniMed Therapeutics Inc.
("CanniMed") is Canada's most
experienced licensed producer of medical cannabis, with over 20,000
kg per annum in funded capacity. CanniMed forms the heart of
Aurora's Medical Cannabis Centre of Excellence, aimed at product
and market development.
Aurora also owns Berlin-based
Pedanios GmbH, the leading wholesale importer, exporter, and
distributor of medical cannabis in the European Union. The Company
owns 51% of Aurora Nordic, which will be constructing a 1,000,000
square foot hybrid greenhouse in Odense,
Denmark. The Company offers further differentiation through
its acquisition of BC Northern Lights Ltd. and Urban Cultivator
Inc., industry leaders, respectively, in the production and sale of
proprietary systems for the safe, efficient and high-yield indoor
cultivation of cannabis, and in state-of-the-art indoor gardening
appliances for the cultivation of organic microgreens, vegetables
and herbs in home and professional kitchens.
Aurora holds a 25% ownership interest in Alcanna Inc. (formerly
Liquor Stores N.A.), (TSX:CLIQ) who are developing a cannabis
retail network in Western Canada.
In addition, the Company holds approximately 17.23% of the issued
shares in extraction technology company Radient Technologies Inc,
and has a strategic investment in Hempco Food and Fiber Inc., with
options to increase ownership stake to over 50%. Aurora is also the
cornerstone investor in two other licensed producers, with a 22.9%
stake in Cann Group Limited, the first Australian company licensed
to conduct research on and cultivate medical cannabis, and a 17.62%
stake in Canadian producer The Green Organic Dutchman Ltd., with
options to increase to majority ownership.
Aurora's Common Shares trade on the TSX under the symbol "ACB",
and are a constituent of the S&P/TSX Composite Index
About MedReleaf
Voted Top Licensed Producer at the 2017 Lift Canadian Cannabis
Awards, MedReleaf is an R&D-driven company dedicated
to innovation, operational excellence and the production of
top-quality cannabis. Sourced from around the world and carefully
cultivated in one of two state of the art ICH-GMP and ISO 9001
certified facilities in Ontario, the Company delivers a
variety of premium products for the global medical market and is
committed to serving the therapeutic needs of its medical patients
and providing a compelling product assortment for the adult-use
recreational consumer. For more information on MedReleaf, its
products, research and how the company is helping patients
#livefree, please visit MedReleaf.com or follow @medreleaf.
Forward looking statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
information in this news release constitutes forward-looking
statements under applicable securities laws. Any statements that
are contained in this news release that are not statements of
historical fact may be deemed to be forward-looking statements.
Forward looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "potential", "believe",
"intend" or the negative of these terms and similar expressions.
Forward-looking statements in this news release include, but are
not limited to, statements with respect to accretive earnings,
anticipated benefits associated with the acquisition of MedReleaf,
statements with respect to the effect of the Transaction on the
combined company and its strategy going forward, the completion of
any capital project or expansions, the timing for the completion of
the Transaction; the consideration to be received by shareholders
of MedReleaf, which may fluctuate in value due to Aurora common
shares forming the consideration; the satisfaction of closing
conditions including, without limitation (i) required Aurora and
MedReleaf shareholder approvals; (ii) necessary court approval in
connection with the plan of arrangement, (iii) receipt of any
required approvals under the Competition Act; (iv) certain
termination rights available to the parties under the Arrangement
Agreement; (v) Aurora obtaining the necessary approvals from the
TSX for the listing of its common shares in connection with the
Transaction; and (vi) other closing conditions, including, without
limitation, compliance by Aurora and MedReleaf with various
covenants contained in the Arrangement Agreement. In particular,
there can be no assurance that the Transaction will be completed.
Forward looking statements are based on certain assumptions
regarding Aurora and MedReleaf, including expected growth, results
of operations, performance, industry trends and growth
opportunities. While Aurora and MedReleaf consider these
assumptions to be reasonable, based on information currently
available, they may prove to be incorrect. Readers are cautioned
not to place undue reliance on forward-looking statements.
Forward-looking statements also necessarily involve known and
unknown risks, including, without limitation, risks associated with
general economic conditions; adverse industry events; future
legislative and regulatory developments; inability to access
sufficient capital from internal and external sources, and/or
inability to access sufficient capital on favourable terms; the
cannabis industry in Canada
generally, income tax and regulatory matters; the ability of Aurora
to implement its business strategies; competition; currency and
interest rate fluctuations and other risks.
Readers are cautioned that the foregoing list is not
exhaustive. Readers are further cautioned not to place undue
reliance on forward-looking statements as there can be no assurance
that the plans, intentions or expectations upon which they are
placed will occur. Such information, although considered reasonable
by management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those
anticipated.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement and reflect
our expectations as of the date hereof, and thus are subject to
change thereafter. Aurora and MedReleaf disclaim any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law. Factors that could cause anticipated
opportunities and actual results to differ materially include, but
are not limited to, matters referred to above and elsewhere in
Aurora's MedReleaf's public filings and the material change reports
that will be filed in respect of this Transaction, which are, or
will be, available on SEDAR.
Notice to U.S. Holders. Both Aurora and
MedReleaf have been formed outside of the
United States. Transaction will be subject to disclosure
requirements of Canada that are
different from those of the United
States. Financial statements included in the documents, if
any, will be prepared in accordance with Canadian accounting
standards and may not be comparable to the financial statements of
United States companies. It may be
difficult for a securityholder in the
United States to enforce his/her/its rights and any claim a
securityholder may have arising under the U.S. federal securities
laws, since the companies are located in Canada, and some or all of their officers or
directors may be residents of Canada or another country outside of
the United States. A
securityholder may not be able to sue a Canadian company or its
officers or directors in a court in Canada or elsewhere outside of the United States for violations of U.S.
securities laws. It may be difficult to compel a Canadian company
and its affiliates to subject themselves to a U.S. court's
judgment.
AURORA CANNABIS
INC.
|
MEDRELEAF
CORP.
|
Terry
Booth
|
Neil
Closner
|
CEO
|
CEO
|
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SOURCE Aurora Cannabis Inc.