NASDAQ | TSX: ACB
Long Term Investment Expected to Deliver
Aurora Immediate Positive Cash Flow
- Aurora acquires a controlling interest in Bevo; one of the
largest suppliers of propagated vegetables and ornamental plants in
North America with proven track
record of profitability
- Bevo will continue to be run by existing management team;
robust growth plan includes use of Aurora Sky for ornamental plant
cultivation and for vegetable propagation
- Transaction is expected to be immediately accretive adding
~$9 million of LTM Adjusted EBITDA;
Aurora remains on track to achieve consolidated positive Adjusted
EBITDA run rate exiting the first half of fiscal 2023.
EDMONTON, AB, Aug. 25,
2022 /CNW/ - Aurora Cannabis Inc. (the
"Company" or "Aurora") (NASDAQ: ACB) (TSX: ACB), the
Canadian company defining the future of cannabinoids worldwide, is
pleased to announce today that a wholly-owned subsidiary of the
Company has acquired a controlling interest in Bevo Agtech Inc.
("Bevo"), the sole parent of Bevo Farms Ltd., one of the
largest suppliers of propagated vegetables and ornamental plants in
North America (the "Bevo
Transaction"). Concurrent with closing of the Bevo
Transaction, Bevo entered into an agreement
to acquire the Company's Aurora Sky facility in
Edmonton, Alberta through the
acquisition of one of Aurora's wholly-owned subsidiaries (the
"Aurora Sky Transaction" and together with the Bevo
Transaction, the "Transaction").
The Transaction allows Aurora to immediately benefit from a
profitable, cash flow positive and growing business, and may have
the potential to drive long term value to Aurora's existing
cannabis business via the application of Bevo's industry leading
plant propagation expertise. Aurora, through its wholly-owned
subsidiary, will acquire 50.1% of Bevo's outstanding common shares,
take a controlling position on Bevo's board of directors and
financially consolidate Bevo. Bevo's experienced management team
are to remain significant shareholders and stay in place to embark
on a robust growth plan, including the use of the Aurora Sky
facility for orchid cultivation and vegetable propagation.
Founded in 1986, Bevo operates 63 acres of greenhouse in
British Columbia, Canada; is led
by a management team with over 85 years of agricultural experience,
and supplies greenhouses, nurseries, field farms and wholesalers.
Bevo has consistently demonstrated growth in revenue and earnings
over the past decade through process improvements and facility
expansions. For the twelve months ended June
30, 2022, Bevo has achieved revenues of $39 million and Adjusted EBITDA of $9 million (excluding non-recurring rental
revenue). Bevo's business exhibits seasonality driven by
agricultural grow cycles, with the strongest financial period being
from January to June.
Management Commentary
"This investment once again demonstrates our disciplined capital
allocation approach and is consistent with both our short term
needs and long-term vision to be the leading global cannabis
company. Bevo's track record in generating not only positive
Adjusted EBITDA but free cash flow, world class propagation
expertise, and established distribution networks in Canada and the
United States makes them an ideal strategic partner," said
Miguel Martin, Chief Executive
Officer of Aurora. "We expect this investment and collaboration
between industry leaders will drive significant shareholder value
and synergies for both parties. We are also excited about Bevo
repurposing Aurora Sky and the potential to expand the scale and
scope of their business and saving significant costs previously
expected in connection with the wind down and sale of the
facility".
Leo Benne, President & CEO of
Bevo, added, "Since inception, Bevo has taken great pride in
utilizing state-of-the-art technology to become a leading plant
propagator in North America. We
are delighted to join forces with Aurora to pursue our high growth
strategy, starting with our move into Alberta which allows us to significantly
expand Bevo's addressable market. We are incredibly happy that the
Aurora team is committed to keeping all of our facilities dedicated
to our customer base, and to expanding our operations into
Alberta through the addition of
the Aurora Sky facility. It is clear that the Aurora team is deeply
aligned with our existing business plans and objectives for
profitable growth, and we look forward to building upon the
strengths of Aurora as a sponsor to accelerate our business."
Strategic Rationale
- Supports Aurora's timeline to profitability with positive
and growing Adjusted EBITDA and free cash flow. The
Transaction is aligned with Aurora's plan to achieve Adjusted
EBITDA profitability on a run-rate basis in the first half of
fiscal 2023, as Bevo has consistently achieved positive and growing
Adjusted EBITDA for over 10 years.
- Bevo's management team is pursuing a high-growth business
plan intended to scale Adjusted EBITDA from current levels,
starting with conversion of the Aurora Sky facility for
non-cannabis agriculture. Repurposing of the Aurora Sky
facility is expected to generate revenue and Adjusted EBITDA with
minimal capital investment needed to retrofit the facility, while
saving on facility shutdown costs. This is expected to allow Bevo
to greatly increase its production capability, extend its shipping
range, and access new regional greenhouse demand in Canada and the
United States.
- Bevo employs proprietary and innovative processes and
greenhouse technology designed to provide industry-leading
efficiency. Ability to leverage Bevo's propagation
capabilities is expected to enhance Aurora's existing genetics
licensing business (Occo) to create healthy clones for sale and
could potentially lead to large scale cannabis propagation across
the industry.
- Bevo's management team will retain substantial equity
ownership and partner with Aurora to drive profitable growth across
both businesses. Bevo's existing management team, who have
a proven track record of achieving consistent revenue growth and
driving EBITDA improvement through innovative agricultural
processes, will remain in place with significant equity
ownership.
Transaction Details
Aurora is purchasing its controlling interest in Bevo from
certain of Bevo's existing shareholders (the "Bevo Selling
Shareholders"). Total cash consideration paid by a subsidiary
of Aurora on closing was approximately $45
million. Up to an additional $12
million shall be payable by a subsidiary of Aurora to the
Bevo Selling Shareholders over the three years following closing of
the Bevo Transaction, conditional on Bevo successfully achieving
certain financial milestones at its Site One facility in
Langley, which additional amounts
may be satisfied, at Aurora's option, through the issuance of
Aurora common shares, subject to approval of the Toronto Stock
Exchange.
Up to $25 million could be payable
over time by Bevo to Aurora in connection with the Aurora Sky
Transaction, based on Bevo successfully achieving certain financial
milestones at the Aurora Sky Facility. Closing of the Aurora Sky
Transaction is conditional upon receipt of certain third-party
consents.
Advisors
Lazard Canada Inc. acted as exclusive financial advisor and
Stikeman Elliott LLP acted as legal counsel to Aurora in connection
with the Transaction.
Agentis Capital Advisors acted as exclusive financial advisor
and Fasken Martineau DuMoulin LLP acted as legal counsel to Bevo in
connection with the Transaction.
About Aurora Cannabis
Aurora is a global leader in the cannabis industry, serving both
the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in
global cannabis, dedicated to helping people improve their lives.
The Company's adult-use brand portfolio includes Aurora Drift, San
Rafael '71, Daily Special, Whistler, Being and Greybeard, as well
as CBD brands, Reliva and KG7. Medical cannabis brands include
MedReleaf, CanniMed, Aurora and Whistler Medical Marijuana Co.
Driven by science and innovation, and with a focus on high-quality
cannabis products, Aurora's brands continue to break through as
industry leaders in the medical, performance, wellness and adult
recreational markets wherever they are launched. Learn more at
www.auroramj.com and follow us on Twitter and LinkedIn.
Aurora's common shares trade on the NASDAQ and TSX under the
symbol "ACB" and is a constituent of the S&P/TSX Composite
Index.
About Bevo
Bevo is North America's leading
supplier of propagated agricultural plants, operating approximately
63 acres of greenhouse facilities on 98 acres of land in
Langley, BC, 50 acres of land in
Aldergrove, BC, and 20 acres of
land in Pitt Meadows, BC. Bevo's
main products are the propagation of vegetable plants such as
tomatoes, peppers, cucumbers, and other plants such as bedding
plants, flowers and grasses. Bevo markets its products to
established greenhouse growers, nurseries and retail outlets
throughout North America.
Forward Looking
Information
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 made in this news
release include statements regarding the Transaction, including,
but not limited to: the expected timing for closing of the Aurora
Sky Transaction; the impact of the Transaction on the
Company's premiumization strategy and position in the Canadian
recreational market; the impact of the Transaction on the Company's
path to profitability and goal to achieve Adjusted EBITDA
profitability in the first half of fiscal 2023; the synergies,
revenue, positive cash flow and positive Adjusted EBITDA expected
to be realized as a result of the Transaction; the
expansion of the scale and scope of Bevo's business in
connection with the Aurora Sky Transaction and the potential for
conditional additional consideration to be paid in connection with
the Transactions.
These forward-looking statements are only predictions.
Forward looking information or statements contained in this news
release have been developed based on assumptions management
considers to be reasonable. Material factors or assumptions
involved in developing forward-looking statements include, without
limitation, publicly available information from governmental
sources as well as from market research and industry analysis and
on assumptions based on data and knowledge of this industry which
the Company believes to be reasonable. Forward-looking statements
are subject to a variety of risks, uncertainties and other factors
that management believes to be relevant and reasonable in the
circumstances could cause actual events, results, level of
activity, performance, prospects, opportunities or achievements to
differ materially from those projected in the forward-looking
statements. These risks include, but are not limited to, the
ability to retain key personnel, the ability to continue investing
in infrastructure to support growth, the ability to obtain
financing on acceptable terms, the continued quality of our
products, customer experience and retention, the development of
third party government and non-government consumer sales channels,
management's estimates of consumer demand in Canada and in jurisdictions where the Company
exports, expectations of future results and expenses, the risk of
successful integration of acquired business and operations (with
respect to the Transactions and the repurposing of the Aurora Sky
facility and more generally with respect to future acquisitions),
management's estimation that SG&A will grow only in proportion
of revenue growth, the ability to expand and maintain distribution
capabilities, the impact of competition, the general impact of
financial market conditions, the yield from cannabis growing
operations, product demand, changes in prices of required
commodities, competition, and the possibility for changes in laws,
rules, and regulations in the industry, epidemics, pandemics or
other public health crises, including the current outbreak of
COVID-19, and other risks, uncertainties and factors set out under
the heading "Risk Factors" in the Company's annual information form
dated September 27, 2021 (the
"AIF") and filed with Canadian securities regulators
available on the Company's issuer profile on SEDAR at www.sedar.com
and filed with and available on the SEC's website at www.sec.gov.
The Company cautions that the list of risks, uncertainties and
other factors described in the AIF is not exhaustive and other
factors could also adversely affect its results. Readers are urged
to consider the risks, uncertainties and assumptions carefully in
evaluating the forward-looking statements and are cautioned not to
place undue reliance on such information. The Company is under no
obligation, and expressly disclaims 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
expressly required by applicable securities law.
Non-GAAP Measures
This news release contains reference to certain financial
performance measures that are not recognized or defined under IFRS
(termed "Non-GAAP Measures"). As a result, this data may not
be comparable to data presented by other licensed producers of
cannabis and cannabis companies. Non-GAAP Measures in this news
release include, but are not limited to, "Adjusted EBITDA".
Adjusted EBITDA is calculated as net income (loss) excluding
interest income (expense), accretion, income taxes, depreciation,
amortization, changes in fair value of inventory sold, changes in
fair value of biological assets, share-based compensation,
acquisition costs, foreign exchange, share of income(losses) from
investment in associates, government grant income, fair value gains
and losses on financial instruments, gains and losses on deemed
disposal, losses on disposal of assets, restructuring charges,
onerous contract provisions, out-of-period adjustments, and
non-cash impairments of deposits, property, plant and equipment,
equity investments, intangibles, goodwill, and other assets.
Adjusted EBITDA is intended to provide a proxy for the Company's
operating cash flow and is widely used by industry analysts to
compare Aurora to its competitors, and derive expectations of
future financial performance for Aurora, and excludes out-of-period
adjustments that are not reflective of current operating results.
Adjusted EBITDA increases comparability between comparative
companies by eliminating variability resulting from differences in
capital structures, management decisions related to resource
allocation, and the impact of FV adjustments on biological assets
and inventory and financial instruments, which may be volatile and
fluctuate significantly from period to period.
For an explanation of this measure to related comparable
financial information presented in the consolidated financial
statements prepared in accordance with IFRS, refer to the Company's
news release of February 10, 2022, a
copy of which is available under the Company's profile on SEDAR at
www.sedar.com the discussion below.
Non-GAAP Measures should be considered together with other
data prepared in accordance with IFRS to enable investors to
evaluate the Company's operating results, underlying performance
and prospects in a manner similar to Aurora's management.
Accordingly, these non-GAAP Measures are intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with IFRS. Neither the TSX nor its Regulation Services
Provider (as that term is defined in the policies of the TSX)
accepts responsibility for the adequacy or accuracy of this
release.
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SOURCE Aurora Cannabis Inc.