Aurora Cannabis (NYSE: ACB) (TSX: ACB) (Frankfurt: 21P) has signed a binding letter of intent with Hempco Food and Fiber (TSX-V: HEMP) to acquire all of the issued and outstanding common shares of Hempco.
Under the deal, Aurora will pay C$1.04 per share, payable in common shares, totaling around C$63.4 million.
Currently, Aurora owns about 52% of the issued and outstanding Hempco shares.
Why Aurora Buying Hempco Shares
Hempco is a provider of hemp-based foods, hemp fiber and hemp nutraceuticals. The company produces and markets the brands PLANET HEMP and PRAISE, hemp-based foods and nutritional supplements for people and animals. It has developed multiple international distribution channels, selling through highly-visible platforms, such as Amazon.com, Well.ca and Metro. The company is in the process of commissioning production at its 56,000-sq.-ft. hemp processing facility.
Further, Hempco offers additional differentiation in the industrial hemp market, with a range of hemp and hemp-based derivative products. These products fuel a global market that offers more sustainable alternatives in production and processing for the textiles, agriculture and agri-food and nutraceutical industries. The industrial hemp market is expected to reach U$10.6 billion by 2025.
Through its combined hemp assets, Aurora said it is well positioned to drive growth through the sale of hemp products to more than 100 countries around the globe.
“This transaction will enable us to fully integrate Hempco and its new Nisku processing facility into Aurora’s global hemp operations including Agropro, Borela and ICC,” Aurora CEO Terry Booth stated.
“Our goal is to strengthen our CBD-from-hemp supply chain as well as our hemp business of hemp-based superfoods, nutraceuticals and fibers. With vertical integration, product innovation expertise, and global reach, we are well positioned to extend our market share in these potential multibillion-dollar industries,” Booth added.
Transaction
Under the terms of the letter agreement, the proposed transaction is expected to be effected by way of a court approved plan of arrangement under the Business Corporations Act (British Columbia) or by way of an alternate structure as determined by Aurora and Hempco based upon tax, securities and corporate law and other relevant considerations.
Aurora agreed to pay C$1.04 per Hempco share, payable in Aurora shares at a deemed value of C$12.01 per Share, being the volume-weighted average trading price of Aurora shares on the Toronto Stock Exchange in the five trading days immediately prior to the date of the letter agreement.
Hempco’s outstanding options and warrants will be adjusted in accordance with their terms such that the number of Aurora shares received upon exercise and the exercise price will reflect the exchange ratio.
The proposed transaction will require shareholder approval from two-thirds of the votes cast by the holders of Hempco shares at a shareholder meeting to be held to consider the proposed transaction. In addition to shareholder approval, the proposed transaction will be subject to applicable regulatory and court approvals and the satisfaction of other customary conditions.
Upon completion of the transaction, Hempco will become a wholly owned subsidiary of Aurora and Hempco’s shares will be de-listed from the TSX Venture Exchange. It is expected that Aurora will apply to cause Hempco to cease being a reporting issuer under applicable Canadian securities laws.
It is currently expected that, subject to receipt of all regulatory, court, shareholder and other approvals, and the satisfaction or waiver of all conditions, the transaction will be completed in the second quarter of 2019.
The companies expect to execute a definitive agreement on or before May 15.
