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BMO Enters A $150 Million Cannabis Finance Agreement With Aurora

By Ayanna Rutherford
Jun 28, 2018

Solidifying its commitment to the cannabis industry this week, the Bank of Montreal on Wednesday, made a significant move by financing Aurora Cannabis Inc. (TSX:ACB) (OTCQB:ACBFF) CAD$200 million according to a statement released by the company. The terms of the financing deal are split to include CAD$150 million as a loan and CAD$50 million in revolving credit.

Under the deal, Aurora agreed to pay an interest rate of more than four percent annually. The financing agreement also takes Canada's pending recreational laws into consideration. According to a statement, Aurora can take an additional CAD$45 million in October when the country’s recreational cannabis laws take effect.

Capitalizing on Cannabis While Others Wait

BMO’s work with pot companies is not just limited to Aurora. The Toronto-based bank has become a major player in the cannabis industry over the last year. Although before 2018 the cannabis industry in North America had a lot of promise when United States Attorney General Jeff Sessions issued a repeal to the Cole Memo it was felt throughout the legal marijuana industry, reverberating throughout the world. Financial institutions based in countries like Canada where cannabis is legal either recreationally or medically shied away from doing business with the industry for fear of compromising their relationships with the U.S.

But not BMO. While five of the “Big Six” Canadian financial institutions tried to avoid the marijuana industry, BMO pushed forward.  In fact, one of the bank’s first major deals came just a few weeks after the U.S. Attorney General Sessions repealed the Cole Memo.

In late January, BMO made history when it worked with Aurora rival Canopy Growth Corp. (NYSE:CGC) (TSX:WEED). The bank along with GMP Securities lead Canopy Growth’s $175 million bought deal offering of five million shares valued at $34.60.  BMO’s involvement marked the first time a financial institution of this magnitude participated with cannabis industry.

This week was not the first time the bank has worked with Aurora. Back in May, BMO served as the financial advisor to Aurora when they purchased MedReleaf for $2.51 billion (CAD$3.2 billion) in what was the Canadian cannabis industry’s most significant deal.  That deal increased Aurora’s capacity to 570,000 kilograms of cannabis per year while expanding their grow facilities to 11 including two in Denmark.

Canada and The Rest of the World

With medical marijuana already federally legal and 90 companies publicly listed, Canada’s cannabis industry is valued just north of C$30 billion according to the Calgary Herald.  Canada's cannabis market shows no signs of slowing down. The momentum is expected to grow when recreational cannabis becomes legal in October.

Another huge potential area for growth for Canada’s cannabis businesses is on the international level as more countries try to get in on the “green rush.” Canadian marijuana companies’ presence is being felt around the world including on the continent of Africa.

Major Canadian players like Canopy Growth and Aphria Inc. (TSX: APH) have made investments in Lesotho, a small nation who legalized medical marijuana ten years ago.

Exports are another international area where Canada’s cannabis businesses have expanded. Canada is dominating the cannabis export business according to Reuters. The numbers for the export of Canadian cannabis products, especially oil, are growing at a staggering rate. Marijuana Business Daily reports that Canada’s cannabis oil exports increased by 300 percent between 2016 and 2017.    

“In 2016, 100.8 kilograms of cannabis oil were shipped overseas. That jumped to 400.4 kilograms in 2017, as more countries legalized MMJ”, according to the Marijuana Business Daily report.

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