Keeping a critical Canadian crop in-house, Organigram Global agreed Tuesday to buy its compatriot marijuana producer Aurora Cannabis for $7.80 Canadian per share, or C$560 million.
The deal tops a long-running hostile bid for Aurora by U.S. weed chain Curaleaf Holdings.
The Canadian companies say their merger will create "a global cannabis champion with a leadership position in Canada, Europe and Australia." In the comedown from a stock market high some five years ago, licensed cannabis producers in both Canada and the U.S. have been consolidating.
Barron's had counseled investors to remain sober and not chase the highs.
The merger will close after approval at shareholder meetings of both companies, which they expect to hold in December. Aurora stockholders can take payment from Organigram in cash, stock or half-and-half. Helping fund the deal will be Organigram's strategic shareholder BT DE Investments Inc., which is an indirect subsidiary of British American Tobacco.
State-legal U.S. marijuana producers like Curaleaf became hot stocks among retail investors at the start of the decade. Voters in one state after another were opening new territories for the product, and the federal government seemed ready to drop its prohibition. But competition from unlicensed weed sales has remained fierce, and federal legalization has yet to come through.
Up north, Canada's marijuana industry has closed sprawling growhouses built for a recreational market that didn't come. Aurora narrowed its focus to prescription sales in Canada and Europe, while Organigram has remained in the recreational market. The companies say they expect C$50 million in annual savings from the merger.
When Curaleaf launched its hostile appeal to Aurora's shareholders in August, Aurora's board recommended against the deal. Aurora repeated its rejection after Curaleaf sweetened its bid last month to C$5 in cash and stock.
Curaleaf did not respond to a request for comment on Tuesday.
Organigram's deal represents a 20% premium over Curaleaf's last offer, and a 93% premium over Aurora's stock price before the American company started its pursuit.
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