Cannabis seedlings are seen at the new Aurora Cannabis facilty on Friday, November 24, 2017 in Montreal.Ryan Remiorz/The Globe and Mail
Aurora Cannabis Inc. can't fast-track its hostile bid to buy CanniMed Therapeutics Inc., two securities regulators have ruled.
Canada's hostile takeover regime gives a target company at least 105 days to respond to an unfriendly offer and weigh other options. Aurora was trying to get the amount of time that its bid has to remain open slashed to 35 days but, on Wednesday, securities commissions from Ontario and Saskatchewan thwarted its attempt to speed up the takeover process.
But Aurora also claimed victory Wednesday, as another part of the ruling backed its bid to quash a poison pill defence that CanniMed had enacted to fend off Aurora's takeover.
The decision comes one month after Aurora offered to acquire CanniMed, the oldest licensed producer of medical cannabis in Canada. CanniMed doesn't want to be bought by Aurora, and has instead struck a deal to buy a smaller marijuana producer named Newstrike Resources Ltd., which has no sales or patients but is known for its backing from the Tragically Hip.
Aurora's takeover offer for CanniMed has to stay open until March 9 – about a month and a half after CanniMed's shareholders are slated to vote on the Newstrike transaction.
"This is good news for CanniMed shareholders eager to support the Newstrike acquisition to create real and significant value," Brent Zettl, chief executive officer at CanniMed, said in a statement.
Aurora doesn't want CanniMed's deal for Newstrike to succeed, and is urging CanniMed investors to vote against it at the meeting set for Jan. 23. Aurora says it has already locked up the support of three major CanniMed shareholders that together hold 36 per cent of the company's stock. CanniMed says it has garnered the support of investors holding 19 per cent of its stock.
For shareholders of CanniMed to green-light the Newstrike deal, the majority of the votes cast have to be in favour of the transaction.
The commissions also ruled in favour of Aurora's bid to eliminate a poison pill that would have made its offer financially unattractive. The rights plan enacted by CanniMed blocked Aurora from acquiring additional shares in CanniMed and prevented Aurora from signing lock-up agreements with more CanniMed shareholders.
As a result of the ruling, Aurora is allowed to purchase up to 5 per cent more of CanniMed's stock in the market and solicit additional support for its takeover.
"Aurora has secured key legal victories that take us a big step forward towards acquiring CanniMed," Terry Booth, CEO at Aurora, said in a statement.
But, as noted by CanniMed in a news release, Aurora won't be able to cast a vote on the Newstrike deal with these shares because the shareholders of record date for the Jan. 23 meeting is Nov. 30.
Aurora was also ordered to amend its takeover bid circular and related press releases to include additional details on how its bid came to be, including how Aurora learned that CanniMed's board was to vote on the Newstrike deal on Nov. 13, the day it submitted its bid.
CanniMed has accused two directors of launching a covert campaign to sell the company after they and the rest of the board agreed to pursue the Newstrike transaction.
Even though the commissions asked for additional disclosure from Aurora, they also rejected CanniMed's claims that Aurora's all-stock offer should be deemed an insider bid and that Aurora was acting in concert with the three locked-up shareholders to engineer its bid.
Aurora and CanniMed argued in front of both commissions last week at a two-day hearing.