Aurora Cannabis acquires MedReleaf

Today, Aurora Cannabis (ACB)(ACBFF) announced that it agreed to acquire all of MedReleaf’s (MEDFF) outstanding common shares for about 3.2 billion Canadian dollars. Following the announcement, MedReleaf stock surged to a high of 25.9 Canadian dollars or a gain of almost 2.2% in the intraday session. On the other hand, Aurora Cannabis stock fell almost 2.5% to 7.9 Canadian dollars.

MedReleaf Stock Rises on Aurora Cannabis Acquisition

The deal

According to Aurora Cannabis’s press release, the acquisition price of 29.4 Canadian dollars implies a premium of 34% over both companies’ 20-day VWAP (volume-weighted average price) common shares as of May 11.

MedReleaf shareholders are to receive 3.575 common shares of Aurora Cannabis for each MedReleaf share. Consequently, Aurora Cannabis shareholders would own 61% and MedReleaf shareholders would own about 39% of the combined company.

Synergies

This deal would increase Aurora Cannabis’s footprint ahead of the legalization of recreational cannabis (HMMJ) in Canada. Together, the company would have over 570,000 kilograms of capacity to produce cannabis. The companies expect this scale to lower the cost of production, which is expected to be positive for margins. The combination would also allow the companies to capitalize on partnerships with Shoppers Drug Mart, Pharmasave, Alcanna, and Quebec’s SAQ.

With this acquisition, Aurora Cannabis—which was already at second place in terms of market cap—has moved closer to the number-one company, Canopy Growth (WEED).

To learn what investors are paying for these and other cannabis companies, see How Cannabis Stocks Performed Last Week.

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