Exclusive: How Curaleaf Plans to Get More Profit From Aurora’s Indoor Grows

Boris Jordan sees a straightforward opportunity inside Aurora Cannabis’ cultivation footprint: produce substantially more premium cannabis from the assets already there.

In an exclusive interview with IgniteIt, the Curaleaf chairman and CEO said his company estimates Aurora is producing roughly 80 grams per square foot, compared with nearly 140 grams per square foot at some Curaleaf facilities. Jordan believes Curaleaf can close much of that gap by applying its genetics and cultivation methods to Aurora’s indoor grows.

For investors, the significance might seem an agronomic detail, but more production from the same square footage can improve asset utilization, spread fixed cultivation costs across more product and potentially improve margins.

Jordan identified cultivation efficiency as the biggest potential source of savings in the transaction. “I think the biggest savings would come from efficiencies,” Jordan said, estimating Curaleaf could increase Aurora’s capacity by almost 50%. He called the potential impact on profitability and margins “massive.”

Curaleaf Says It Has Already Proven the Model

Jordan’s strongest evidence for the strategy comes from Curaleaf itself.

When he became CEO approximately two years ago, Jordan said Curaleaf averaged roughly 50 grams per square foot across its cultivation facilities.

Today, he said, the company averages 120 to 130 grams per square foot.

“We have gone up 2x-plus in our efficiency in our grows,” Jordan said. “And that’s what we would do for them.”

Jordan does not expect that improvement to require rebuilding Aurora’s facilities.

“It doesn’t require significant [refurbishing],” he said, although he acknowledged that some capital would be necessary.

Jordan floated approximately $105 million in capex as a preliminary estimate that could “transform the economics” of Aurora’s operations, but immediately characterized the number as “a guess.” Curaleaf has not conducted formal due diligence on Aurora, making that estimate particularly preliminary.

That caveat matters. Curaleaf’s estimate of Aurora’s current yields is also not an Aurora-reported metric. Jordan said the company developed its assessment through people familiar with Aurora’s operations.

The Financial Bet

Curaleaf has estimated approximately $40 million in synergies from the proposed transaction. Jordan said Aurora’s SG&A is above 50%, compared with 29% for Curaleaf’s European business this year and an estimated 27% next year. But he repeatedly returned to cultivation as another major source of savings.

The financial thesis is therefore relatively simple.

Curaleaf believes it can take Aurora’s existing premium indoor infrastructure, introduce its U.S. genetics and cultivation methods, and produce substantially more sellable cannabis from the same physical footprint.

Whether those improvements can actually be achieved — and at what cost — cannot be established without due diligence.

But Jordan is pointing investors toward a specific operating bet: Aurora’s existing grow space can make more money.

Next in the series, we turn from the economics of the deal to the takeover itself: what happens if Aurora rejects Curaleaf’s offer, why Jordan is prepared to go directly to shareholders, how quickly he wants the transaction completed, and the price discipline that could ultimately make Curaleaf walk away.

Stay tuned. Stay ignited.