The market responded favorably to CanniMed’s (CMED.TO) (CMMDF) decision to postpone a shareholder vote on its proposed takeover of Newstrike Resources Ltd (HIP.V) (NWKRF) to January 25th.
Canadian cannabis producer CanniMed postponed the vote to discuss a possible transaction with rival producer Aurora Cannabis (ACB.TO) (ACBFF) and we are favorable on this move.
The cut off time for investor to deposit proxies is 10:00 am on January 23rd, 48 hours prior to the meeting. CanniMed and Aurora have agreed to a standstill until January 21st and until such time, and in connection therewith:
- Neither CanniMed nor Aurora will solicit any proxies of CanniMed shareholders
- Aurora will not acquire any additional shares of CanniMed
- Neither CanniMed nor Aurora will make any announcement regarding a potential transaction and will Aurora not make any changes to its offer from November 24, 2017 unless mutually agreed
- Neither CanniMed nor Aurora will solicit an alternative transaction or enter any discussions or negotiations with respect to an alternative transaction during the standstill period
The Combined Company Would be an Industry Leader
The Aurora acquisition makes sense from a business standpoint and the combined company will be a very attractive business. We are bullish on the combined company and see tremendous opportunity for synergies. Both companies are capitalizing on two of the most significant trends in the cannabis industry, international markets and cannabis oils.
If Aurora completes this acquisition, we expect the companies to recognized millions worth of synergies. The combined company would have an enhanced product line, significantly strong reach across the globe, ample growth opportunities, and a massive base of registered marijuana patients.
CanniMed was one of the first to receive a license to sell cannabis oils from Health Canada and produces cannabis in a GMP compliant facility. The company also offers a gelcap product and is developing new smokeless products (i.e. dissolvable thin wafer). CanniMed has a strategic distribution agreement with PharmaChoice, a member-owned cooperative that represents more than 700 independent pharmacy owners across Canada.
One of the reasons why we are favorable on the potential of the combined company is due to the support that Aurora would provide CanniMed. Over the last year, Aurora has made several investments and acquisitions that would benefit CanniMed’s business.
Aurora has a war chest of a cash, strategic relationships, and significant infrastructure in Canada and abroad. While CanniMed has sold some of its cannabis oil in Australia and the Cayman Islands, Aurora has significant relationships and investments in Germany and Australia. If this deal is completed, Aurora would significantly enhance and expand CanniMed’s global reach.
We are favorable on the impact Aurora would have on CanniMed’s cannabis oil business. The combined company would have the capital and resources to execute on the global medical marijuana market and we are bullish on this opportunity.
Clock is Ticking for Investors to Vote
With less than one week left for CanniMed shareholders to vote for or against the Newstrike acquisition, this is something investors need to keep an eye on.
We are favorable on this development and will monitor how this situation evolves or changes ahead of the new vote. We still expect to see CanniMed shareholders vote against the acquisition of Newstrike and in favor of Aurora’ acquisition of CanniMed.