Aurora and MedReleaf close shareholder agreement
Aurora Cannabis (TSX: ACB) and MedReleaf (TSX: LEAF) reported the closing of the previously announced arrangement agreement. Under the terms of the agreement, LEAF common shareholders received 3.575 common shares of ACB for each LEAF common share held. ACB will next submit applications with the Toronto Stock Exchange and the Ontario Securities Commission to delist LEAF and for LEAF to cease to be a reporting issuer (read complete news release here).
This is a newsworthy event as it is the largest cannabis transaction in the world and it probably creates the largest cannabis company in the world. However, we’re not sure it is good for ACB shareholders.
You will recall, LEAF management wanted out. They offered themselves for sale to the highest bidder and ACB was the highest and only bidder. As an all-stock transaction, there are now millions of ACB shares in the hands of weak shareholders, that is, owners that were looking for a way out and likely still are.
We also don’t think a lot of the purchase. We commented on the build or buy strategy in the Canadian cannabis grow industry and we still favor build over buy. Based on the ACB market action recently, investors appear to agree.