Cannabis seedlings at the Aurora Cannabis facility in Montreal are seen in this file photo.Ryan Remiorz/The Canadian Press
Aurora Cannabis Inc. is closing in on a deal to buy CanniMed Therapeutics Inc. for more than $1-billion, the largest acquisition to date in Canada's marijuana industry, sources close to the transaction said.
Under the deal, CanniMed shareholders are expected to get a combination of Aurora shares and cash, according to the sources, who spoke on condition of anonymity. They would not confirm a specific price, but the overall value indicates a large premium over Aurora's previous unsolicited bid which had a cap of $24 a share.
CanniMed, a medical marijuana producer, closed at $37.51 on the Toronto Stock Exchange on Tuesday, giving it a market capitalization of about $900-million.
The arrangement represents a negotiated outcome following Aurora's hostile bid for CanniMed, which it launched in November when CanniMed traded for around $15 a share. The two sides began talks last week, and while the arrangement is expected to be finalized soon, it could still fall apart.
Meanwhile, Newstrike Resources Ltd., a cannabis company looking to specialize on Canada's recreational pot market, had previously agreed to a friendly takeover by Saskatoon-based CanniMed. But Newstrike is excluded from the Aurora transaction, and will now carry on as a stand-alone company, the sources said.
It was not immediately known why the company was dropped from the deal talks. However, shares in both Newstrike and CanniMed have surged in recent weeks, making a buyout of both extremely pricey.
Officials with the companies declined to comment.
Aurora's initial bid was conditional on CanniMed abandoning its deal with Newstrike, which is best known for its celebrity backing – Canadian Music Hall of Fame rockers the Tragically Hip have a stake of more than 5 per cent.
Newstrike shareholders had approved that deal last week and CanniMed shareholders were set to vote on Jan. 25.That date had been postponed after Aurora approached CanniMed with an 11th hour overture last Wednesday.