CanniMed To Aurora Cannabis: No Means No

CanniMed Therapeutics (CMMDF)has made it clear that it does not want to be acquired by Aurora Cannabis (ACBFF). The company announced that it has applied to the Financial and Consumer Affairs Authority of Saskatchewan and the Ontario Securities Commission for help regarding the hostile takeover.

CanniMed said that Aurora’s offer should be considered an “insider bid” for the purposes of applicable Canadian securities laws. They claim that SaskWorks Venture Fund Inc., Apex Investments Limited Partnership, Golden Opportunities Fund Inc. and Vantage Asset Management Inc. (locked-up shareholders) are all working with Aurora. Stating, “The CanniMed Shares of the Locked-Up Shareholders be excluded from the 50 per cent minimum tender condition contained in section 2.29.1(c) of National Instrument 62-104 – Take-Over Bids and Issuer Bids”

CanniMed is also asking the following from the regulators:

• The Hostile Bid is an “insider bid” for purposes of MI 61-101 and consequently, Aurora be required to obtain a formal valuation in connection with the Hostile Bid and otherwise comply with the requirements in Part 2 of MI 61-101;
• The Hostile Bid be cease-traded until 105 days after a take-over bid circular that complies with the rules for an “insider bid” as required by MI 61-101, is delivered to the CanniMed Shareholders;
• Aurora is required to retract and correct several materially false and misleading statements in connection with the Hostile Bid; and
• Each of the Locked-Up Shareholders failed to issue news releases and file Early Warning Reports as required by Part 5 of NI 62-104 and Part 3 of National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues.

Aurora made an offer to acquire CanniMed on November 13, 2017, in a C$582 million ($453 million) offer. CanniMed is instead urging shareholders to reject that deal and support its proposed acquisition of Newstrike Resources Ltd., a marijuana firm backed by the Tragically Hip.

The two companies have been at odds over the proposed acquisition. Aurora says it made a formal offer, while CanniMed disagrees and said no formal offer was ever made. While the two were arguing publicly over the proposed offer, CanniMed moved forward with Newstrike. CanniMed also began putting poison pills in place to sour Aurora’s desire to takeover the company. In a company statement CanniMed said, “By approving the Newstrike Acquisition, CanniMed Shareholders can create a premier cannabis company that is positioned to offer innovative, high-quality products with two distinct top-tier brands that are each well-positioned to address key product trends and emerging drivers of growth in both the medical and adult use recreational cannabis markets. Taking this step will make CanniMed more valuable to any future acquiror.”

CanniMed went on to note that Aurora has had two product recalls in less than a year and its Aurora Sky is delayed with increasing costs. The company also suggested that Aurora’s management sold stock ahead of a stock decline and that it had an “aggressive and unfocused acquisition strategy.” CanniMed also said that the Aurora offer is tilted in favor of their shareholders.

Aurora Fires Back

Aurora said it wasn’t even looking for such a deal, but that some of CanniMed’s shareholders approached them. “This is the latest in a series of increasingly desperate schemes by CanniMed management that would have the effect of disenfranchising their own shareholders and preventing them from exercising their fundamental rights,” said Terry Booth, CEO of Aurora. “We made a bona fide offer, featuring a compelling premium that 38% of existing CanniMed shareholders immediately supported and continue to support through lockup agreements, including two prominent Saskatchewan -based investment funds. We had hoped to make this a friendly and collaborative process, but Mr. Zettl refuses to even pick up the phone or return our calls to have a discussion.”