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CanniMed to withdraw the shareholder rights plan adopted on November 28th?

Summary:

Aurora Cannabis (TSE:ACB) vs CanniMed Therapeutics (TSE:CMED)

The hype around Canada’s marijuana legalization keeps building up, largely thanks to several of the biggest companies who are now starting to become very aggressive with acquisitions and market positioning.

With Canopy Growth currently leading the way in terms of production capabilities and overall market value, there is a massive competition happening for the “number 2” spot, where Aurora Cannabis and CanniMed Therapeutics try to outsmart each other in their quest for the most profitable market position.

Aurora just recently acquired Larssen, one of the biggest greenhouse design companies in Canada, which has been successful in completing over 1,000 projects globally and is currently involved with as much as 5 Canadian LP’s.

Aurora will combine Larssen into a subsidiary called Aurora Larssen Projects Ltd. which will give them an upper hand with all future acquisitions with smaller to medium sized licensed producers and ACMPR applicants.

Their other big acquisition is H2 Biopharma Inc, a late stage ACMPR applicant from Quebec. H2 is currently building their 48,000 square foot factory with the expected annual production of 4,5 tons.  

These purchases skyrocketed Aurora stocks, which went from 3.06 CAD to 7.78 CAD just in November alone.

CanniMed is their next object and also the one that’ll take a bit more work.

Aurora’s blitz shopping came to a temporary halt when they launched an unsolicited hostile takeover bid for Cannimed Therapeutics on November 14. CanniMed quickly acknowledged the offer and instantly urged their shareholders to take no action.

“CanniMed shareholders have an attractive and accretive transaction available to them now as CanniMed and Newstrike are extremely well positioned to deliver significant shareholder value going forward. As evidenced by the Health Canada regulatory directive announced on November 21, 2017, the clear drivers of greatest value will be branding and offering value added oil derivative products to the recreational market, two metrics where the CanniMed and Newstrike team are truly well positioned. The economics, particularly for the oils derivative products, are truly enormous.” said Brent Zetti, CEO of CanniMed.

CanniMed executives claim that their new company will have as much as 45,000 kg production capacity by 2019, which are definitely some impressive numbers if they were to turn out correct.

The only problem for CanniMed right now is that Aurora has irrevocable lockup agreements with 38% of CanniMed shareholders, which gives them some leverage, however, that is still not enough for the entire deal to go through without any in-depth negotiations.

CanniMed has formed a Special Committee which will consider the hostile bid with the team of trusted advisors and reply as soon as possible. As of November 28th, CanniMed’s Board of Directors has adopted a shareholder rights plan which essentially prevents Aurora from acquiring CanniMed shares that are not part of the initial Hostile Bid or lock-up agreements.

After failing to have the minimum bid period for the hostile takover reduced by Ontario Securities Commission regulators, Aurora Cannabis will also have to amend its takeover bid circular and all related press releases to include information that could impact CanniMed shareholders if they decide to accept or reject the offer.

On the other side, the regulators also neutralized CanniMed’s ‘poison pill’ defense of the takeover, which was focused towards pressing their board to acquire Newstrike Resources Ltd. — a deal that Aurora wants abandoned.

Aurora is to amend its publications related to the deal by Jan. 12.

CanniMed was also denied the chance to exclude the shares of the locked-up shareholders from the 50% of CanniMed shares that Aurora needs to approve its bid. They are now to withdraw their shareholder rights plan, initially adopted on November 28th.

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