Huge merger creates marijuana giant ahead of legalisation in Canada

by: - May 15, 2018
23 Views   no discussions

In this file photo taken on April 20, 2018 shows a man wearing a Canadian maple leaf flag with marijuana leaf during the annual 4/20 rally on Parliament Hill in Ottawa, Ontario, Canada. (Photo: AFP)

Montreal, Canada (AFP) — With the legalisation of recreational marijuana looming in Canada, therapeutic producer Aurora says it is acquiring rival MedReleaf Corp in a huge deal set to create a giant company.

Aurora today said it would pay Can$3.2 billion (US$2.51 billion) as part of an all-stock deal that will leave Aurora shareholders with control of 61 per cent of the resulting company.

The new company will have a production capacity of 570 tonnes of cannabis a year, with nine greenhouse operations in Canada and two in Denmark, Aurora and MedReleaf said in a joint statement.

The merger comes amid surging interest in the country’s nascent ganja industry with legalisation expected this summer.

Already in January, Aurora had spent more than Can$1 billion to purchase rival CanniMed.

The Canadian government originally scheduled legalisation for July 1, coinciding with the Canada Day weekend, but complications with new distribution and monitoring systems forced delays.

But last week Prime Minister Justin Trudeau told AFP that legalisation would come this summer.

While provincial governments work to set up distribution channels – and prepare to share resulting tax windfalls with the federal government – companies linked to the cannabis business have seen a speculative bubble develop.

The capitalisation of the three biggest Canadian producers on the Toronto Stock Exchange has exploded in recent months.

Aurora shares have more than tripled in value in the past year, to more than Can$4.6 billion.
Whether or when that bubble might burst is unclear.

But it illustrates the growing interest in this soft drug, seen increasingly as a fiscal boon to governments in Canada, as it has been in US states like California that have legalised ganja use.

In another deal, one of Aurora’s chief rivals, Canopy Growth, today announced its purchase of the 33 per cent of the Tweed Joint Venture group that it did not already own for Can$374 million, and said it planned to list its shares on the New York Stock Exchange.