Aurora Cannabis enters LOI to acquire Farmacias Magistrales S.A. in Mexico
By Alexis Grace
Dec 12, 2018
Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) announced on Monday its intent to acquire Farmacias Magistrales S.A., Mexico’s first and only federally licensed importer of materials containing THC. It gives Aurora yet another stronghold in the global marijuana market which is projected to reach $28 billion by 2024. Moreover, it allows them unfettered access to a nearly untapped territory for the large industry players, until now.
Aurora shares increased in price early in the trading day following the morning news but remained relatively flat by the end of the trading day. The stock closed down $.02 to $5.73 Monday from the prior trading day, a small decline of 0.35 percent. The activity followed the day’s trend in the overall marijuana market, with the Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) (TSX:HMMJ) experiencing a 0.54 percent decline Monday.
"This transaction positions Aurora with exclusive access to supply THC-containing medical cannabis to a large market of more than 130 million people, while also enabling us to capture the full margin of the medical cannabis we sell there," said Terry Booth, CEO of Aurora in a statement. "Farmacias has a large distribution network of both retail outlets and pharmacies, which will enable us to quickly scale up our operations across Mexico. Integrating Farmacias with our operations in Canada and Latin America will not only accelerate growth, it will build substantial long-term shareholder value."
Working around Mexican law
According to Cesar Vargas Dominguez, Commercial Director of Farmacias, it took Farmacias four years to complete the process to gain the license to import materials greater than 1 percent THC. He expressed his excitement over the transaction with Aurora.
“This transaction validates our work over the last four years toward obtaining a portfolio of exclusive licenses in Mexico, a complicated process which we have now completed successfully,” said Dominguez in a statement. “Aurora is our partner of choice because of its production capacity, global reach, product quality, patient-first culture, and commitment to a science-based approach to medical cannabis. We look forward to becoming part of the Aurora family and executing on the Mexican medical cannabis opportunity."
Farmacias owns and operates a 12,000 square foot facility in Mexico City to grow solely medical marijuana. The medical marijuana and CBD products are primarily for sale to treat kidney disease, blood pressure and anesthetic medications, as vitamin supplements and for cosmetics such as anti-aging creams.
Mexico a perfect complement to the Latin American markets for Aurora
Prior to the announcement of this acquisition, Aurora was already tapping into markets in Latin America, including Colombia and Uruguay. Farmacias will give the company access to Mexico in addition through their 80,000 retail locations and 500 pharmacies and hospitals that distribute medical marijuana products.
"Together, Farmacias and Aurora will be well positioned to become a key player in the development of the medical cannabis market in Mexico,” said Neil Belot, Chief Global Business Development Officer for Aurora in a statement. “We were impressed by the quality of management, assets and operations, and look forward to working closely with the Farmacias team to execute on our significant first mover advantage."