Securities Regulators Decide That Aurora And CanniMed Are Both Winners, According to Aurora And CanniMed
Aurora Cannabis Inc. (TSX:ACB) and CanniMed Therapeutics Inc. (TSX:CMED) each released statements early Wednesday celebrating victories following last week’s two day hearing before the Financial and Consumer Affairs Authority of Saskatchewan and the Ontario Securities Commission. Regulators handed down a mixed decision, putting both companies’ PR operations into overdrive in their efforts to sway public opinion.
Aurora hailed the decision to end CanniMed’s so-called “poison pill,” the shareholder rights plan enacted to prevent Aurora from grabbing up further securities or lock-up agreements from CanniMed shareholders. Conversely, CanniMed praised regulators for denying Aurora’s request to shorten to 35 days the 105 day minimum deposit period, calling the move an inappropriate attempt to pressure shareholders.
“As previously disclosed…”
Over the course of the two-day hearing, which occurred just before the Christmas holiday, Canadian securities regulators debated over a host of questions from both parties. Aurora came into the process looking to end CanniMed’s shareholder rights plan that the company enacted on November 28 to halt the hostile takeover bid. On top of that request, Aurora executives asked the regulators to shorten the 105 day minimum deposit period to 35 days. With CanniMed shareholders set to vote on the Newstrike deal in early January, Aurora felt the 105 day waiting period would put their bid out of reach
For their part, CanniMed asked to halt Aurora from acquiring 5 percent of the company’s outstanding shares on the open market, as per rules and regulations overseeing such activity. They also specifically sought to call out Aurora in front of regulators, having them deemed “in concert with locked-up shareholders” while labeling the offer an “insider-bid.” Coming into the hearing Aurora claimed to have already acquired the backing of shareholders holding 36 percent of CanniMed stock, a point to which CanniMed cried foul.
“We are pleased with the Commissions’ decision…”
After the two day hearing which tested the bounds of Canadian capital markets, regulators handed down a split decision that sent both companies scrambling to their shareholders. Aurora’s application to shorten the minimum deposit period was denied by the panel, meaning the 105-day waiting period stands. The aggressor company must also amend its takeover bid circular to correct information that the judges deemed would unduly influence CanniMed shareholder’s decisions towards the hostile bid.
“We are pleased with the Commissions’ decision and this is good news for CanniMed shareholders eager to support the Newstrike Acquisition to create real and significant value, and confirms our belief that it was inappropriate for Aurora to seek to shorten the required bid deposit period and that disclosures made by Aurora were deficient and misleading,” said Brent Zettl, CanniMed President and CEO, in a statement. “The Newstrike Acquisition remains an excellent opportunity for CanniMed and its shareholders, and is clearly superior to Aurora’s inadequate Hostile Bid that offers phantom value based on an inflated Aurora share price.”
In their release, Aurora claimed that outside of those issues, the regulators voted entirely in their favor. CanniMed’s “poison pill” was killed, allowing Aurora to move forward with their attempts to pick up more shares on the open market. The panel also ruled that Aurora’s bid was not an “insider-bid” nor did they lock-up any shareholders improperly. Aurora praised the ruling from the securities regulators.
“Aurora has secured key legal victories that take us a big step forward towards acquiring CanniMed, and integrating its team and operations into our organization to further build the preeminent global cannabis company,” said Aurora CEO Terry Booth. “The great news today is that CanniMed shareholders are now freed from CanniMed management’s efforts to take away their fundamental right to support the superior opportunity. CanniMed shareholders can now freely choose.”
“On one hand…”
With the hearing over, the war of words has now escalated. CanniMed is now hoping that shareholders will vote to acquire Newstrike Resources on January 19, while simultaneously ignoring any offers from Aurora. The board has made public their intentions to vote for the Newstrike deal, and is urging shareholders to follow.
“The Newstrike Acquisition remains an excellent opportunity for CanniMed and its shareholders, and is clearly superior to Aurora’s inadequate Hostile Bid that offers phantom value based on an inflated Aurora share price,” commented CanniMed CEO Brent Zettl.
For their part, Aurora is pressuring CanniMed shareholders to vote “no” on the Newstrike deal. The company made clear from the beginning that acquiring CanniMed would not include Newstrike.
“On one hand, there is the highly dilutive, cash-draining Newstrike bid. On the other hand, shareholders can tender their shares to Aurora’s Offer for an immediate significant 57% premium, plus the opportunity to become part of Aurora’s faster growth, better execution, shareholder value generation, and exciting drive to global leadership in the cannabis sector,” remarked Aurora CEO Terry Booth.
And so it goes.