Organigram launches $561-million takeover offer for Aurora Cannabis

Besieged Aurora Cannabis Inc. ACB-T has found a white knight, ending a tumultuous saga that saw the company grow into a $14-billion behemoth before collapsing alongside much of the legal cannabis industry.

Edmonton-based Aurora announced Tuesday it had agreed to be acquired by rival Canadian cannabis producer Organigram Global Inc. for about $561-million. Aurora has spent the past several months trying to fend off a hostile takeover attempt from Stamford, Conn.-based Curaleaf Holdings Inc.

Organigram is offering $7.80 a share, giving Aurora shareholders a choice of cash, 5.86 Organigram shares, or a combination of $3.75 in cash and 3.04 Organigram shares. That represents a roughly 21-per-cent premium relative to Curaleaf’s latest offer of US$5 a share.

If the transaction is allowed to proceed, it would mark a modest conclusion to what began as one of the most auspicious tales in Canadian cannabis legalization.

As recently as 2019, Aurora commanded a stock market valuation of nearly $14-billion. Its products were ubiquitous on store shelves and investors were so eager to acquire Aurora equity that the company was able to easily execute multibillion-dollar all-stock corporate takeover deals.

The company even hired billionaire activist investor Nelson Peltz as a strategic adviser, giving his investment company – Trian Fund Management LP – options to acquire several hundred million dollars’ worth of Aurora shares for what was, at the time, a steep discount to their market price.

By the end of 2020, however, the market high had long faded and Aurora found it had dramatically overpaid for multiple acquisitions. The company took nearly $2-billion in impairment charges over the course of that year and cut more than 1,000 jobs as part of a broader restructuring.

Mr. Peltz stepped down from his role at Aurora less than a month after the company announced its single largest writedown of roughly $1.6-billion in September of 2020. Terry Booth, Aurora’s mercurial co-founder and long-time chief executive officer, had left the company earlier that year and current CEO Miguel Martin took over just before Mr. Peltz resigned.

Mr. Martin has since faced scrutiny for receiving multimillion-dollar compensation packages as Aurora’s market value has continued to steadily decline.

Earlier this year, Aurora officially abandoned the recreational cannabis market to focus exclusively on medical products, which tend to offer much higher profit margins.

The company has been trying to position itself as a global supplier to the growing number of countries that have legalized cannabis for medicinal purposes. Organigram has also sought to capitalize on the international cannabis market, having recently acquired Germany’s Sanity Group for roughly $174-million.

Cannabis sales to foreign markets are on track to surpass $1-billion this year, according to Statistics Canada, and the industry expects that to double in 2027.

However, both companies have decried bureaucratic restrictions they say are preventing them from maintaining Canada’s global leadership position as other countries develop their own cannabis export regimes.

If the takeover deal is ultimately approved, the combined company will operate five EU-GMP certified production and distribution facilities. Good manufacturing practices (GMP) certification is required to sell cannabis into European Union markets and few producers outside of Canada are GMP compliant.

At least two-thirds of votes cast by Aurora shareholders at a special meeting expected to take place in December must be in favour of the transaction for the deal to proceed.

Organigram is funding the deal in part through a $188-million private placement with British American Tobacco and $210-million in loan facilities from ATB Financial.

BAT is the company’s single largest shareholder and James Yamanaka, who became CEO of Organigram earlier this year, is a former BAT executive.