How Bizarre: Aurora Cannabis Raises Cain, But Has It Cost Them The Battle For CanniMed Therapeutics?
Three days into the new year and one week after securities regulators inserted themselves into the fracas, the corporate battle between Aurora Cannabis (TSX:ACB) and CanniMed Therapeutics (TSX:CMED) has devolved into a spectacle of grandstanding and mudslinging. Following Tuesday’s series of releases by Aurora, arguably a ploy by the company to curry favor with their rival’s shareholders, CanniMed took to presenting their side through a statement early on Wednesday. In perhaps the lowest point of the whole saga, Aurora fired back, pressing on with the war of words by calling CanniMed’s deal with Newstrike Resources (TSX-V:HIP) “bizarre.”
“Aurora’s hostile bid will leave you nothing.”
In a statement to shareholders released Wednesday, CanniMed laid out the reasons they believe the Newstrike deal is superior to Aurora’s hostile offer. The no-holds-barred declaration was a lengthy diatribe laying out the reasons as to why Aurora is a poor choice for CanniMed shareholders. It made clear the position of CanniMed’s board while attempting to dig deep into the heart of Aurora executives.
According to the statement, Aurora’s bid is holding back CanniMed’s share prices. CanniMed argues that prices are already higher than Aurora’s $24.00 capped offer, and could go higher without the unnecessary rivalry weighing them down. Furthermore, CanniMed claims in their statement that Aurora’s share prices are inflated, based on speculation and nothing of concrete value. As the letter continues, a laundry list of accusations of mismanagement and financial instability fly at Aurora.
“You should be very wary about the risk associated with an Aurora management team who has a track record of poor execution and even more concerned that their actions demonstrate they doubt they will be able to make good on the promises they have made to the market by selling off shares,” CanniMed writes in their statement.
“Simply put, this is a bizarre action…”
Not to be outdone, Aurora came out swinging on Wednesday morning, lambasting CanniMed’s recent announcement of their supply agreement with Newstrike subsidiary Up Cannabis. The statement questioned the move by CanniMed’s board as lacking “strategic rationale,” while slinging ad hominem attacks on the company’s fiscal responsibility to shareholders. It was a low point of a battle that apparently has no bottom.
"Simply put, this is a bizarre action by CanniMed management," said Cam Battley, Executive Vice President of Aurora in the statement. "Why would CanniMed sign a supply agreement with a company they have proposed to acquire in three weeks? Why would they sign a supply agreement with a company that doesn't have a sales license, and therefore has no ability to fulfill the agreement?“
Concluding their statement, Aurora noted that if successful in their attempt to takeover CanniMed they would “review all agreements,” a not so subtle hint that the Up Cannabis deal would be dead-on-arrival should CanniMed find themselves under new management.
Where It All Stands
CanniMed shareholders will vote on the Newstrike deal on January 19. Since December 29, Aurora has acquired 566,000 shares of CanniMed stock, accounting for about a 2.85 percent ownership stake in the company. CanniMed shares were trading at around $19 per unit and rising recently, even in light of the hostilities playing out in the press. Aurora shares have also ticked upward despite the negative news, with shares on the OTC Markets rising from $8 to over $10 per unit. The company recently announced liquid assets more than CAD$500 million.
Still, at this point, the negative press and the schoolyard attacks have soured many over any upsides that the deal may have. It is starting to seem that CanniMed is correct in their assessment too, that Aurora needs them more than the other way around. With Aurora being the second largest cannabis company behind Canopy Growth Corp. (TSX:WEED), if CanniMed is wrong, then it has to be asked, what is Aurora’s end goal? It would seem they are losing the PR war at the least.
In 2000 AOL took over Time Warner for $164 billion in one of the most massive deals of the young millennium. Within two years the new company lost $200 million, a result of the dotcom bubble bursting and a bit of hubris. Aurora would be wise to look at history and ask themselves if this is a battle they have already lost.