The Biggest Marijuana Merger Ever Lifts Cannabis Stocks
An expected merger between Canada’s Aurora Cannabis and MedReleaf propelled marijuana stocks higher on Monday, sending a strong signal that consolidation is afoot ahead of planned legalization this year.
Biggest Merger Ever
Aurora Cannabis, one of Canada’s biggest marijuana companies, is set to purchase MedReleaf in an all-stock merger worth $2.2 billion. According to an official statement, the deal will enable the newly merged company to produce 570,000 kilos (1.26 million pounds) a year of cannabis across nine facilities in Canada and two in Denmark.
The deal is expected to be finalized in August, just a few months before the Canadian government legalizes recreational pot. Canada was set to legalize the drug on July 1 but a series of bottlenecks pushed back the date until the fall.
Under the deal, Aurora will offer MedReleaf shareholders 3.575 shares in Aurora in exchange for every unit in MedReleaf they hand over.
“It gives us a footprint in Ontario, it prepares us properly for the adult usage market, the strains that MedReleaf has managed to grow are the leading strains in this country, arguably in the world,” said Terry Booth, Aurora’s CEO.
Ontario is Canada’s most populous province, accounting for roughly 40% of the nation’s gross domestic product.
Aurora Cannabis and MedReleaf are the second and fourth largest Canadian marijuana companies by market capitalization. Combined, they have the potential to outgrow industry leader Canopy Growth Corporation, which is currently worth $6.45 billion. Taking today’s prices into account, the newly merged company is capitalized at more than $7 billion.
That said, Aurora Cannabis has emerged as the largest pure play cannabis company in the world, earning that distinction through a series of key acquisitions. By purchasing MedReleaf, the company has given itself a strong foothold in the medical marijuana sector.
Marijuana Stocks Outperform
North America’s marijuana industry gained on Monday, as news of the Aurora-MedReleaf deal made its way to investors.
The North American Marijuana Index rose 2.2% to close at $256.64, its highest settlement in a month.
MariMed Inc. (MRMD) and OrganiGram Holdings Inc. (OGI) were the top performers, gaining 14.4% and 11.1%, respectively.
Cronos Group (CRON) jumped 7.2% and Canopy Growth Corp (WEED) added 6.9%.
Merger news failed to lift Aurora Cannabis (ACB), as share prices fell 2.1% on Monday.
The Canadian Marijuana Index, which is capitalized at $24.41 billion, rose 2.9% to $660.35. Meanwhile, the $6.82 billion U.S. Marijuana Index added 1.2% to finish at $90.20.
Cannabis stocks outperformed Wall Street by a wide margin on Monday. The S&P 500 Index gained just 0.1% during the session.
Featured image courtesy of Shutterstock.