Aurora Cannabis Acquires Hempco Food and Fiber

Aurora Cannabis (ACB) was trading lower early this morning after falling about 8% last week alone. Aurora and its peers came under pressure after Canopy Growth (WEED)(CGC) reported dismal earnings. To make matters worst, fears of an impending recession gripped the market last week.

Earlier today, Aurora announced it had completed its acquisition of all of Hempco Food and Fiber’s outstanding common shares, valued at about 63.4 million Canadian dollars. Hempco will no longer be traded on the Toronto Stock Exchange, as it has become a wholly-owned Aurora subsidiary.

With Hempco Food and Fiber, Aurora will have access to raw hemp, from which CBD (cannabidiol) can be extracted. CBD from hemp and CBD from marijuana are different. Planet Hemp and Praise are two brands under Hempco. The company will also be completing its new 56,000 hemp processing facility in Nisku, Alberta.

The most important reason for Aurora’s acquisition may be the US hemp market. After the US legalized hemp last year, various CBD products from hemp are expected to flood the country, including skincare products, textiles, protein products, infused beverages, and CBD oil.

The US CBD space is heating up, and many major retailers and businesses want a piece of the market. This month, Kroger announced it would start selling Charlotte Web’s (CWBHF) hemp products.

Canopy Growth, which is investing $100 million–$150 million in building a hemp industrial park in New York, acquired AgriNextUSA in March. The company plans to extend its reach in the US market with the acquisition. To learn more about the company, read Canopy Growth: Analysts’ Views after Its Earnings. You may also want to read HEXO: Lower Target Price and Valuation Multiple. Tilray (TLRY), another major Canadian cannabis player, acquired Manitoba Harvest this year to pursue a similar path in the US.