November 20, 2017
By: Andrea Hill
I am pleased to bring you this instalment of my blog, rounding up what’s currently happening in the cannabis industry in Canada and abroad.
Aurora makes a move for CanniMed
- Aurora Cannabis, one of the cannabis industry’s most valuable licensed producers by public market capitalization, announced on November 14th that it had made an all-share proposal to acquire CanniMed Therapeutics Inc., a Saskatchewan-based licensed producer, for $24 per share in a deal that values CanniMed at over half a billion dollars.
- There’s nothing new about M&A activity in the cannabis sector. What is new about this deal is the manner in which it has unfolded and the shape it may take. Aurora’s press release acknowledged that CanniMed had “not yet engaged in active discussions with Aurora”, although Aurora “welcomes” such conversations. “Aurora and CanniMed are a great fit, truly complementary, and I am convinced we can generate even greater value by combining the two companies and aligning our efforts strategically,” said Aurora’s CEO in the release.
- However, if Aurora did not receive a response to its proposal from CanniMed’s board by 5:00 pm on Friday November 17, it stated, “Aurora intends to commence a formal takeover bid for CanniMed.”
- CanniMed responded to Aurora by issuing a press release of its own, stating that it “acknowledges” Aurora’s press release and proposal (which it defined as the “Unsolicited Offer”), but calling the LP’s offer “speculative”, saying “the share consideration (or equivalent share value) offered by Aurora in its press release is inflated”, and noting that Aurora could determine not to proceed with the deal in the circumstances described in Aurora’s press release. CanniMed urged its shareholders several times not to take any action “until such time as the Board has had the opportunity to fully consider and make a recommendation regarding the Unsolicited Offer.” CanniMed issued another press release on Friday announced CanniMed’s plan to acquire Newstrike Resources Ltd., the parent company of licensed producer UP Cannabis Inc., and stated that the terms of any Aurora offer were unknown.
- This morning, Aurora issued another press release announcing its intention to launch a takeover bid for CanniMed, saying “the rationale for the combination is too strong to accept inaction” from CanniMed’s board, and disputing that the terms of its offer to CanniMed were unknown, saying that detailed terms were outlined in its November 13 proposal to CanniMed’s board. The press release also disclosed that Aurora has lock-up agreements with CanniMed’s three largest shareholders for a total of 38% of CanniMed shares. An additional factor in the mix is CanniMed’s proposed acquisition of Newstrike, which Aurora called “extremely troubling” and “oppressive to CanniMed shareholders”.
- CanniMed has not issued a press release directly on this topic as at the time of this blog post.
Provincial recreational sale models – where we’re at
- Alberta and Quebec have revealed their provincial sale and distribution models for recreational cannabis, joining New Brunswick, Ontario, and Manitoba as provinces which have publicized their plans. A geographic spectrum is emerging as eastern provinces favour government control while western provinces demonstrate comfort with private sale mixed with government oversight. Ontario, Quebec, and New Brunswick have adopted a government-run distribution model, with Quebec barring home-growing entirely. Alberta and Manitoba will allow private retailers to sell cannabis, although Alberta’s government will control online sales.
- Of the provinces which have not yet announced their plans:
- Newfoundland and Labrador has reported a high level of public engagement on the topic and plans to announce its model in the next few weeks. An online survey gathered 2,600 responses, with majority support for 19 years as the minimum age to purchase cannabis, and for sale through cannabis-specific dispensaries.
- PEI and Nova Scotia have conducted online surveys. Nova Scotia, which has the second-highest percentage of people who admit to past-year cannabis use of any province after BC (as per Health Canada data), is expected to release its plan by late 2017, while PEI expects to release its model in the spring of 2018.
- Saskatchewan conducted an online survey which closed in September, but has not said much about its plans. The Saskatchewan Urban Municipalities Association is concerned that preparation is being pushed to the last minute.
- BC’s Premier John Horgan has hinted that the distribution model could vary across the province. In a radio interview, he said that he wants to put a “system in place that benefits those who want to participate as entrepreneurs” in the industry, but officials need to regulate it. “We need to make sure we’re squishing out the black market,” he said – which could be a challenge, seeing as Vancouver just issued its 12th business licence to an illegal dispensary.
- Territories: facing unique challenges which include remote settlements and certain “dry” communities which have prohibited alcohol, Nunavut, Yukon, and Northwest Territories have conducted online surveys and town hall meetings to hear from their residents. A senior administrative officer of the City of Yellowknife, however, feels that the city has been inadequately consulted, especially as the “first line of defence” for the new program. The federal Department of Justice insisted it had met with the City, and said recreational cannabis plans will be unveiled in a few weeks.
Rehash: quick links to interesting points
- Merry Canna-mas! An unlicensed Vancouver dispensary has been inundated with demand for a Christmas advent calendar filled with cannabis edibles that can be ordered online. Neither the $230 price tag nor the fact that recreational cannabis is not yet legal seems to be a deterrent. Apparently the dispensary, which like other dispensaries is illegal under federal law, has had to turn down purchase orders from France, the UK, and the Philippines.
- Wanted: Cannabis Branding Pro: Shoppers Drug Mart has attracted attention for its job posting seeking a “Senior Brand Manager, Medical Cannabis”. The successful candidate will lead the medical brand strategy and all marketing activities with physicians and health care providers in the cannabis space. Shoppers Drug Mart, through its parent company, Loblaw Companies Ltd., applied for a producer’s licence to distribute medical cannabis in the fall of 2016.
- Stalemate: the Globe reports that licensed producer Aphria, which holds several US cannabis investments, has met with the TSX, which has recently confirmed that involvement by its listed issuers with US cannabis businesses was a breach of its policies. The meeting was “amicable, cordial, engaging”, but inconclusive, said Aphria’s CEO. See my blog post about the TSX’s policy here.
- Viva Las Vegas! MJBizCon’s industry-leading Marijuana Business Conference and Expo in Las Vegas was in full swing last week. Last year, 10,000 people attended the event, which bills itself as the largest cannabis industry conference in the world. A shout out to all my friends and colleagues who attended!
What’s Up in Weed is not legal or financial advice. It is a blog by SkyLaw which is made available for informational purposes only and should not be used as a substitute for professional advice from a lawyer. This blog is subject to copyright and may not be reproduced without our permission.
If you have any questions or would like further information, please contact us. The SkyLaw team would be delighted to speak with you.
© Copyright SkyLaw 2017. All rights reserved. SkyLaw is a registered trademark of SkyLaw Professional Corporation.
Subscribe to What’s Up in Weed
Click here or enter your email address below to receive our weekly blog by email: