BREAKING: Curaleaf Moves to Take Over Aurora Cannabis With $4-Per-Share Proposal

Curaleaf Holdings is moving to take its proposed acquisition of Aurora Cannabis directly to shareholders after Aurora’s leadership declined to engage with the company privately.

Curaleaf announced Tuesday its intention to launch a takeover bid for all outstanding Aurora shares, proposing $4.00 per share in a combination of Curaleaf stock and cash.

The proposed consideration consists of 0.3463 Curaleaf shares plus $0.75 in cash for each Aurora share. Curaleaf said the proposal represents a 45% premium to Aurora’s 30-day volume-weighted average price of $2.75.

However, a formal takeover bid has not yet commenced, and Curaleaf cautioned that there is no guarantee an offer will ultimately be made.

Curaleaf Takes Its Proposal Public

The public move follows nearly two months of unsuccessful attempts by Curaleaf to bring Aurora to the negotiating table.

According to Curaleaf, CEO Boris Jordan sent Aurora Chairman and CEO Miguel Martin a formal letter of intent on June 23 outlining the proposed transaction and offering to enter into a mutual nondisclosure agreement to conduct reciprocal due diligence.

Curaleaf followed up on July 7 after Aurora declined to engage under those terms.

“We were very disappointed that the Board refused to meaningfully engage,” Jordan said. “We will now take our proposal directly to Aurora shareholders because the premium is significant, the strategic rationale is compelling, and further delay is unjustified.”

Curaleaf said it remains willing to negotiate directly with Aurora’s board.

Why Curaleaf Wants Aurora

The proposed acquisition would bring together two of the cannabis industry’s largest international platforms while giving Curaleaf substantially greater cultivation capacity outside the United States.

Curaleaf said the combined company would operate across 17 countries and generate more than $1.5 billion in last-12-month revenue and nearly $350 million in adjusted EBITDA.

Aurora would bring more than 50 tons of annual EU-GMP cultivation and manufacturing capacity to the combination, including capacity from its recently acquired Safari Flower Company.

Curaleaf, meanwhile, brings an international distribution network and operations across markets including Germany, the United Kingdom and Poland, along with EU-GMP facilities in Portugal, Spain and Canada.

The combination could therefore give Curaleaf greater control over an international supply chain stretching from cultivation and manufacturing through distribution and patient access.

Curaleaf Projects At Least $40 Million in Synergies

Curaleaf expects the proposed transaction to generate at least $40 million in annual cost synergies.

The company said savings could come from greater vertical integration, cultivation optimization and combining the companies’ international infrastructure.

Curaleaf also sees an opportunity to deploy its genetics across Aurora’s cultivation facilities and improve utilization of the combined cultivation footprint.

If completed, the transaction would create a company with a pro forma market capitalization approaching $3 billion, according to Curaleaf.

For Aurora shareholders, Curaleaf is also pitching the transaction as a way to gain exposure to the U.S. cannabis market through ownership in the combined company.

The $4 Offer Comes With an Important Caveat

The headline $4.00-per-share proposal is based partly on Curaleaf’s share price.

Under the proposed terms, Aurora shareholders would receive $0.75 in cash plus 0.3463 Curaleaf shares.

Curaleaf has also established a $5.00 cap on the value of the total consideration if its own shares rise substantially before the offer is completed. In that scenario, the number of Curaleaf shares issued per Aurora share would be adjusted.

The company said the $4 proposal represents a 45% premium to Aurora’s 30-day VWAP. Curaleaf also characterized the proposal as a 110% premium when Aurora’s balance-sheet cash and cash equivalents are excluded from the calculation.

This Is Not Yet a Formal Takeover Bid

Despite Tuesday’s announcement, Aurora shareholders do not yet have a formal offer to accept.

Curaleaf said full terms would be provided through formal takeover documents filed with Canadian securities regulators and the U.S. Securities and Exchange Commission.

Once formally commenced, Curaleaf expects the offer to remain open for 105 days unless it is extended, accelerated or withdrawn.

Curaleaf said the proposed offer would not contain financing or due-diligence conditions. However, the company identified circumstances under which it could decide not to proceed, including discovering previously undisclosed material adverse information or Aurora adopting defensive measures.

Aurora could also choose to engage with Curaleaf and negotiate a different transaction structure.

That makes Tuesday’s announcement the beginning of a potential takeover battle rather than the announcement of a completed acquisition.

Curaleaf has put a price on Aurora, made its strategic argument public and taken the proposal beyond the boardroom. The next move now belongs largely to Aurora, its board and its shareholders.