Aurora Cannabis Inc. (Aurora or the Company) (TSX: ACB) (OTCQB:
ACBFF) (Frankfurt: 21P; WKN: A1C4WM) and ICC Labs Inc. (TSX-V: ICC)
(
ICC) announced today that the companies have
entered into a definitive arrangement agreement pursuant to which
Aurora intends to acquire all of the issued and outstanding common
shares of ICC (the
ICC Shares) for $1.95 per share
(payable in common shares of Aurora (the
Aurora
Shares) (the
Share Consideration),
reflecting an aggregate purchase price of approximately $290
million (the
Transaction). The Transaction has
been unanimously approved by the Board of Directors of each ICC and
Aurora.
Strategic Rationale
Led by CEO Alejandro Antalich, a
widely-recognized leader in the South American cannabis market with
over 25 years of experience in the pharmaceutical sector, the
acquisition of ICC will establish Aurora as the industry leader in
South America, a continent with over 420 million people. ICC
presently has over 70% market share in Uruguay, the first country
in the world to legalize cannabis for adult consumer use. In
addition, ICC holds licenses in Colombia for the production of
medical cannabis.
The Transaction, once approved, creates a strong
foundation for expansion, and will leverage ICC’s first mover
advantage in South America, bringing significant low-cost
production capacity, a well-diversified product portfolio, and
extensive distribution channels throughout South America and
internationally.
ICC brings Aurora, among other strategic
synergies, the following:
Significant, low-cost Capacity
- Significant expansion of low-cost production and
processing capacity: ICC is expanding rapidly, with both
established facilities and a number of projects nearing completion
to bring the estimated production capacity to over 450,000 kg per
annum, adding significant value to Aurora’s funded footprint:
- Two greenhouse facilities: currently operational -
approximately 92,000 square feet
- Three outdoor grow sites, with a potential total area of over
800 acres, 590 acres of which are in Uruguay and which are being
prepared for cultivation start later this calendar year
- Two facilities currently under construction, adding 124,000
square feet of greenhouse production in Colombia and a 1,000,000 sq
ft facility in Uruguay
Strong Foundation to Capitalize on the
Significant Global CBD Wellness Market Opportunity
- CBD Rich Production: Uruguay is the only
country where regulations currently permit the cultivation of
CBD-rich hemp on a commercial scale, allowing licensed producers to
grow hemp with THC concentrations of up to 1%, providing a
significant yield advantage over global competitors. ICC’s deep
background in pharma and the ability to grow low-cost CBD-rich hemp
at very large scale, positions the companies exceptionally well to
capitalize on global opportunities in the high-growth CBD wellness
market.
- CBD Brand and Distribution: ICC recently
launched its BIDIOL brand of CBD products, and is developing a
broad international distribution network, including a presales
agreement to export product to Mexico, a market with over 125
million people.
- Significant Extraction Capacity: ICC is
progressing well towards the completion of a state-of-the-art
large-scale extraction facility with capacity to process 150,000 kg
of CBD feed per annum. Phase I of the facility is anticipated to be
completed in October 2018, with the full facility online and
operational by late 2018.
- Free Trade: ICC’s new CBD extraction facility
is strategically located approximately five minutes from the
Canelones international airport and within Uruguay’s “Science Park”
free trade zone, exempting facility exports from any applicable
local tax on exports and imports.
Science, High-margin Products and Strong
Genetics
- The First South American GMP Compliant Science
Lab: ICC is close to completing South America’s first
state-of-the-art cannabis science laboratory, designed to the
highest international standards and in compliance with applicable
GMP standards. Soon to be certified, the facility will provide an
early mover advantage over other producers in South America. to
drive sales to international cannabis markets.
- Product Diversification: ICC are leaders in
South America, offering a broad portfolio of dried flower and
higher margin products, including tablets, softcaps, ointments,
creams, drops, infused syrups, and patches.
- Genetics: ICC have secured a portfolio of high
CBD strains that are exclusive to ICC in South America, and are
highly sought after.
Anticipated benefits for ICC shareholders
In addition to the benefits described above,
related to the combined entity, ICC shareholders will receive the
following additional benefits:
- Premium: The Share Consideration represents a
premium of approximately 34% on the 20 day volume-weighted average
trading price of ICC Shares on the TSX-V for the period ending
August 22, 2018, the last trading day prior to ICC issuing a news
release in respect of a media report speculating as to a potential
transaction involving the acquisition of ICC.
- Liquidity: Aurora Shares are listed and posted
for trading on the TSX, providing ICC shareholders with potentially
greater liquidity.
- Aurora Shares: ICC shareholders, who will
represent approximately 3.6% of outstanding Aurora Shares after
giving effect to the Transaction, will have the opportunity to
participate in the future potential increase in the value of
Aurora, one of the world’s largest vertically integrated cannabis
companies with a well-developed international footprint across five
continents.
Management Commentary
“ICC is an ideal partner for Aurora to establish
leadership in the South American cannabis market, delivering clear
first mover advantage on a continent with over 420 million people,”
said Terry Booth, CEO of Aurora. “ICC and its management team have
shown exceptional vision and execution across production,
expansion, distribution and product development. The company has a
very strong management team with deep connections throughout the
continent, which we believe will facilitate successful expansion
into all South American markets.”
Neil Belot, Chief Global Business Development
Officer, added “ICC, as the first company globally to be federally
legalized for the sale of cannabis for adult consumer use, is a
trailblazer in, and has set the example for the responsible
production and distribution to this exciting market. The ICC/Aurora
combination is the trusted partner for governments and other
stakeholders to develop opportunities in emerging South American
cannabis markets. We are extremely excited to be working with
Alejandro and the team at ICC, and look forward to jointly pursuing
a wide variety of opportunities in the adult consumer use, medical
and CBD wellness markets.”
Alejandro Antalich, CEO of ICC added, “ICC was
the first company in the world to receive a cannabis production
license for adult consumer use, making Uruguay the first country
globally in the modern era to legalize cannabis. This has provided
us with significant early mover advantage. Combining with Aurora,
its industry-leading plant, medical and product development science
teams, broad international reach, and strong brands, positions us
well to extend our leadership in the South American cannabis
markets and the emerging global cannabis industry. The
complementary nature of the two organizations and the shared
philosophies made this an ideal match for us to realize our
ambitious growth plans. This is a value-maximizing transaction that
provides our shareholders with a significant premium and an
exciting opportunity to participate in the upside of Aurora, one of
the largest and fastest growing cannabis companies in the world.
With multiple initiatives, such as our expanding international
operations and our state-of-the-art science lab near to completion,
it is time for ICC to move to the next level, and we believe that
Aurora is an ideal partner to achieve this with.”
Terms of the Transaction
The Transaction will be effected by way of a
plan of arrangement under the Business Corporations Act (British
Columbia) (the Arrangement). Under the terms of
the Transaction, each shareholder of ICC (ICC
Shareholder) will receive $1.95 per ICC Share, payable in
Aurora Shares valued at the volume-weighted average trading price
of Aurora Shares on the TSX during the 20 trading day period ending
the second to last trading day on the TSX immediately prior to the
Effective Date (as defined in the Arrangement Agreement), being the
date the Transaction is completed (the Aurora Share
Price).
Pursuant to the terms of the Transaction, based
on the volume-weighted average trading price of Aurora Shares on
the TSX during the 20 trading day period ending September 7, 2018
an ICC Shareholder would receive 0.2448 Aurora Shares for each ICC
Share held, resulting in Aurora issuing approximately 36.2 million
Aurora Shares (fully diluted, treasury method) in connection with
the Transaction, representing approximately 3.6% of outstanding
Aurora Shares after giving effect to the Transaction (actual number
of shares received and issued will be based on the volume-weighted
average trading price of Aurora Shares on the TSX during the
applicable 20 day period preceding the completion of the
Transaction).
The Transaction is subject to the approval of
the Supreme Court of British Columbia and the approval of
two-thirds of the votes cast by ICC Shareholders at a special
meeting to be called of ICC Shareholders to approve the Transaction
(the ICC Special Meeting).
Union Group International Holdings Limited
(Union Group) has entered into a support agreement
with Aurora to, among other things, vote the ICC Shares owned by it
in favour of the Transaction and to otherwise support its
completion, subject to the terms and conditions of such support
agreement. Union Group holds approximately 29% of the issued
and outstanding ICC Shares. All of the directors and senior
officers of ICC (who hold in the aggregate approximately 0.4% of
the issued and outstanding ICC Shares on a non-diluted basis) have
entered into similar support agreements with Aurora pursuant to
which they have agreed, among other things, to support the
Transaction and vote their ICC Shares in favour of the
Transaction.
The Transaction remains subject to certain other
closing conditions including the receipt of certain approvals
(including certain Uruguayan regulatory approvals and the consent
of Aurora’s lenders), and the satisfaction of certain customary
closing conditions. Approval by shareholders of Aurora is not
required.
The Board of Directors of ICC (the ICC
Board) unanimously recommends that ICC Shareholders vote
in favour of the resolution to approve the Arrangement, which will
be the subject of the ICC Special Meeting expected to be held in
the fourth quarter of 2018. The recommendation of the ICC Board is
supported by a fairness opinion from each of Canaccord Genuity
Corp. and INFOR Financial Inc. to the effect that, as of the date
of each opinion, and subject to the assumptions, limitations and
qualifications on which each such opinion is based, the
consideration to be received by ICC Shareholders pursuant to the
Transaction is fair, from a financial point of view, to such
shareholders.
The Arrangement Agreement provides for, among
other things, the ICC Board being able to consider a superior
proposal in certain circumstances and a right in favour of Aurora
to match any superior proposal. The Arrangement Agreement also
provides for the payment by ICC of a termination fee of $9,500,000
in favour of Aurora in certain circumstances. In addition, the
Arrangement Agreement provides that, under certain circumstances,
where the Transaction is not completed because of the failure of
Aurora to obtain certain consents, Aurora would be required to (i)
reimburse ICC’s expenses up to $750,000, and (ii) pay a reverse
break fee to ICC in the amount of $1,250,000.
It is currently expected that, subject to
receipt of all regulatory, court, shareholder and other approvals,
and the satisfaction or waiver of all conditions, the Transaction
will be completed in the fourth quarter of 2018.
Further information regarding the Transaction
will be included in ICC’s management information circular to be
mailed to ICC Shareholders in advance of the ICC Special Meeting
and in ICC’s material change report in respect of the announcement
of the Transaction, each of which will be filed with the Canadian
securities regulators and will be available under ICC’s profile at
www.sedar.com.
Financial and Legal
Advisors
Canaccord Genuity Corp. is acting as financial
advisor to ICC and Norton Rose Fulbright Canada LLP is acting as
legal counsel to ICC. INFOR Financial Inc. was also engaged by the
ICC Board as an independent financial advisor to provide an
independent fairness opinion in respect of the Transaction.McMillan
LLP is acting as legal counsel to Aurora.
About Aurora
Headquartered in Edmonton, Alberta, Canada with
funded capacity in excess of 500,000 kg per year and sales and
operations in 14 countries across five continents, Aurora is one of
the world’s largest and leading cannabis companies. Aurora is
vertically integrated and horizontally diversified across every key
segment of the value chain, from facility engineering and design to
cannabis breeding and genetics research, cannabis and hemp
production, derivatives, high value-add product development, home
cultivation, wholesale and retail distribution.
Highly differentiated from its peers, Aurora has
established a uniquely advanced, consistent and efficient
production strategy, based on purpose-built facilities that
integrate leading-edge technologies across all processes, defined
by extensive automation and customization, resulting in the massive
scale production of high quality product at ultra-low costs.
Intended to be replicable and scalable globally, these production
facilities are designed to produce cannabis of significant scale,
with high quality, industry-leading yields, and ultra-low per gram
production costs. Each of Aurora’s facilities is built to meet
European Union (EU) GMP standards, and its first production
facility, the recently acquired MedReleaf Markham facility, and its
wholly owned European medical cannabis distributor Aurora Europe
GmbH, have achieved this level of certification.
In addition to the Company’s rapid organic
growth and strong execution on strategic M&A, which to date
includes 10 companies acquired – MedReleaf, CanvasRx, Peloton
Pharmaceutical, Pedanios, H2 Biopharma, Urban Cultivator, BC
Northern Lights, Larssen Greenhouses, CanniMed Therapeutics, and
Anandia – Aurora is distinguished by its reputation as a partner of
choice and employer of choice in the global cannabis sector, having
invested in and established strategic partnerships with a range of
leading innovators, including: The Green Organic Dutchman Holdings
Ltd., Radient Technologies Inc., Hempco Food and Fiber Inc., Cann
Group Ltd., Micron Waste Technologies Inc., Choom Holdings Inc.,
Namaste Technologies Inc., Evio Beauty Group, Wagner Dimas, CTT
Pharmaceuticals, Capcium Inc., and Alcanna Inc.
Aurora's Common Shares trade on the TSX under
the symbol "ACB", and are a constituent of the S&P/TSX
Composite Index.
For more information about Aurora, please visit
our investor website, investor.auroramj.com, Twitter, Facebook or
Instagram.
About ICC
ICC is a fully licensed producer and distributor
of medicinal cannabinoid extracts, recreational cannabis and
industrial hemp products in Uruguay as well as a fully licensed
producer of medicinal cannabis in Colombia. The Company has active
operations in Uruguay, and is focused on becoming the worldwide
leading producer of cannabinoid extracts, giving support and
promoting responsible use for medicinal purposes, backed by
scientific research and innovation, while following strict
compliance with standards for quality and safety.
For more information, please visit
www.icclabs.com.
Further information
For Media concerning
Aurora
Heather
MacGregor+1.416.509.5416 heather.macgregor@auroramj.com
www.auroramj.com
For Media concerning ICC
Ian RobertsonExecutive Vice President,
Communication StrategyKingsdale Advisors+1.416.867.2333
(Work)+1.647.621.2646
(Cell)irobertson@kingsdaleadvisors.com
For Aurora Investors
Marc
Lakmaaker+1.647.269.5523 marc.lakmaaker@auroramj.com https://investor.auroramj.com
Rob
Kelly+1.647.331.7228rob.kelly@auroramj.com https://investor.auroramj.com
For Aurora U.S. Investors
Phil Carlson / Elizabeth Barker KCSA Strategic Communications
+1.212.896.1233 / +1.212.896.1203 pcarlson@kcsa.com /
ebarker@kcsa.com
For ICC Investors
Ian RobertsonExecutive Vice President,
Communication StrategyKingsdale Advisors+1.416.867.2333
(Work)+1.647.621.2646
(Cell)irobertson@kingsdaleadvisors.com
Alejandro Antalich, Chief Executive Officer
598.2900.0000 ext. 404 ir@icclabs.com
Forward looking
statements
This news release includes statements containing
certain "forward-looking information" within the meaning of
applicable securities law (“forward-looking statements”).
Forward-looking statements are frequently characterized by words
such as "plan", "continue", "expect", "project", "intend",
"believe", "anticipate", "estimate", "may", "will", "potential",
"proposed" and other similar words, or statements that certain
events or conditions "may" or "will" occur. Forward-looking
statements in this news release include, but are not limited to
statements with respect to accretive earnings, future financial
position and results of operations, anticipated benefits and costs
synergies associated with the Transaction, internal expectations,
estimated margins, expectations for future growing capacity, costs
and opportunities, liquidity of Aurora Shares, effect of the
Transaction on the combined company and its future strategy, plans,
objectives, goals, targets and future developments, expectations
for receipt of licenses to process or distribute cannabis in legal
markets, the completion of any capital projects or expansions, the
anticipated timing for the special meeting of ICC Shareholders and
the closing of the Transaction, the anticipated consideration to be
received by ICC Shareholders, the satisfaction of closing
conditions including: (i) required ICC Shareholder approval; (ii)
necessary court approval in connection with the Arrangement; (iii)
certain termination rights available to the parties under the
Arrangement Agreement; (iv) ICC obtaining the necessary approvals
from the TSX-V; (v) Aurora obtaining necessary approvals from the
TSX for the listing of the Aurora Shares issuable under the
Transaction; (vi) the parties obtaining all requisite Uruguayan
regulatory approvals; (vii) Aurora obtaining the necessary consent
from its lenders; and (viii) other closing conditions, including,
without limitation, the operation and performance of the ICC
business in the ordinary course until the closing of the
Transaction and compliance by ICC with various covenants contained
in the Arrangement Agreement.
These statements are only predictions. Various
assumptions were used in drawing the conclusions or making the
projections contained in the forward-looking statements throughout
this news release, including assumptions regarding the expected
growth, results of operations, performance, industry trends and
growth opportunities for Aurora and ICC.
Forward-looking statements are based on the
opinions and estimates of management of Aurora and ICC at the date
the statements are made, and are subject to a variety of risks and
uncertainties and other factors that could cause actual events or
results to differ materially from those projected in the
forward-looking statements, including, without limitation, risks
associated with general economic conditions; adverse industry
events; marketing costs; loss of markets; a change in the
volume-weighted average trading price of the Aurora Shares from the
date hereof to the Effective Date; market or other events limiting
the liquidity of the Aurora Shares; inability to realize
anticipated synergies; future legislative and regulatory
developments involving cannabis; 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 and elsewhere generally; income tax and
regulatory matters; the ability of ICC and Aurora to implement
their business strategies; competition; crop failure; currency and
interest rate fluctuations and other risks. Readers are cautioned
that the foregoing list is not exhaustive.
Management provides forward-looking statements
because it believes they provide useful information to readers when
considering their investment objectives and cautions readers that
the information may not be appropriate for other purposes.
Consequently, all of the forward-looking statements made in this
news release are qualified by these cautionary statements and other
cautionary statements or factors contained herein, and there can be
no assurance that the actual results or developments will be
realized or, even if substantially realized, that they will have
the expected consequences to, or effects on, ICC or Aurora. In
particular, there can be no assurance that the Transaction will be
completed. 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.
The foregoing share exchange ratio is for
illustrative purposes only: the actual number of Aurora Shares to
be received by ICC Shareholders will be determined based on the
volume-weighted average trading price of Aurora Shares on the TSX
during the 20 trading days preceding the date the Transaction is
completed (with such 20 day period ending on the second last TSX
trading day immediately preceding the date the Transaction is
completed).
These forward-looking statements are made as of
the date of this news release and neither ICC nor Aurora assumes
any obligation to update or revise them to reflect subsequent
information, events or circumstances or otherwise, except as
expressly required by applicable law.
Neither TSX, nor TSX-V, nor their
Regulation Services Provider (as that term is defined in the
policies of Toronto Stock Exchange and TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this
release.