Two of the largest cannabis companies in Canada merged on Monday, making it the largest marijuana deal in history. Aurora Cannabis will purchase rival MedReleaf for $2.51 billion as Canada gets closer to national cannabis legalization scheduled for July.
The historic deal is just the latest in a string of mergers and acquisition in the nascent marijuana industry. Aurora and MedReleaf expect to produce a combined 570,000 kilograms (nearly 630 tons) of cannabis per year.
“This is a transformational transaction that brings together two pioneering cannabis companies, both committed to high technology, high quality and low-cost production, to create a powerful platform for accelerated growth and success on a global scale,” Terry Booth, CEO of Aurora, said in a statement. “The combination strengthens our capacity to service the rapidly expanding global medical cannabis markets, and amplifies our early-mover advantage,” Booth added.
The deal is Aurora’s second large acquisition of the year, coming just months after it bought CanniMed Therapeutics. Shares of Aurora and MedReleaf each rose 1 percent on Monday morning on the Toronto Stock Exchange.
Large-scale Canadian cannabis farmers are fighting for market share as Prime Minister Justin Trudeau pushes to legalize recreational use this year. Deep-pocketed Aurora has acquired more than 10 companies in the past two years. “We’re not done,” Booth said. “Over the next couple weeks you’ll see some more activity from Aurora,” but nothing as large as the MedReleaf deal, he said.
In another deal Monday involving Canadian cannabis firms, Canopy Growth announced it agreed to buy the 33 percent stake in BC Tweed Joint Venture that it doesn’t already own.
Among the highlights of the Aurora-MedReleaf deal:
- Industry-leading scale: The transaction brings together two leading operators with a combined nine facilities in Canada and two in Denmark.
- Low production costs and industry-leading yields: Aurora’s automated greenhouses are expected to deliver industry-leading efficiency and low production costs, delivering sustainably robust margins. MedReleaf’s high-yield cultivation is expected to further enhance productivity and reduce costs across the combined entity’s facilities.
- Extensive distribution channels in Canada and internationally: The two companies have established distribution agreements with Alberta’s Alcanna (formerly Liquor Stores), Quebec’s SAQ, Pharmasave and Shoppers Drug Mart in Canada, among others.