U.S. cannabis operator Curaleaf Holdings (TSX:CURA) went public with an unsolicited takeover offer for Canadian rival Aurora Cannabis (TSX/NASDAQ:ACB) on Tuesday, proposing a deal that values Aurora at a 45% premium and would forge a global cannabis giant with operations across 17 countries and annual revenue exceeding $1.5 billion.
Under the terms disclosed by Curaleaf, each Aurora share would be exchanged for 0.34 of a Curaleaf share plus $0.75 in cash, equating to $4 per share. Curaleaf added that if Aurora’s stock were to experience a “substantial rise” before acceptance, the total bid price would be capped at $5 per share. The company said the offer was taken directly to Aurora shareholders after multiple private attempts to engage Aurora’s management failed to spark discussions.
Curaleaf Executive Chairman Boris Jordan said the combination of Curaleaf’s global distribution platform with Aurora’s leading international medical cannabis franchise and EU-GMP cultivation and manufacturing capacity could unlock significant value through cost and revenue synergies. The company projected at least $40 million in annual cost savings and noted that Aurora shareholders would gain direct exposure to the U.S. market and potential benefits from evolving federal regulations.
Curaleaf did not outline how it plans to finance the cash component of the deal. Under the $5-per-share ceiling scenario, the cash outlay could exceed $46 million. Curaleaf held $107 million in cash as of the end of June.
Aurora pushed back quickly. In a statement released Tuesday afternoon, the company took aim at the $5 price cap and the absence of financing details, and said it would convene a special committee of independent directors to evaluate the bid in line with its fiduciary duties.
Aurora operates almost exclusively as a medical cannabis company. In its most recent quarter, medical sales made up 95% of total revenue of C$67.6 million (US$48.5 million), making it the largest medical cannabis provider in Canada and the country’s top exporter. It also holds a licensed cultivation facility in Germany. Curaleaf, restricted by U.S. law from directly exporting medical cannabis, reaches international markets through fully owned subsidiaries and foreign grow sites, with medical sales accounting for less than half of its total revenue.
Both companies have recorded net profits in only two of their trailing five quarters and have been largely unprofitable for most of their histories. A merger could strip out redundancies and push the combined group toward more consistent profitability. On a trailing twelve-month basis, the two businesses together generated over $1.5 billion in revenue and nearly $350 million in adjusted EBITDA.
Markets reacted swiftly. Aurora shares jumped 20.59% to $3.49 on Nasdaq, while Curaleaf advanced 5.27% to $9.87 on the U.S. OTC market. Still, hostile bids have a limited track record of success, and fusing operations that straddle distinct regulatory environments would be a complex undertaking. The move may be just the opening chapter of a protracted saga.
