Why Did Aurora Cannabis Acquire Hempco Food and Fibre?

Aurora Cannabis
Credit: Aurora Cannabis

Following the completion of a plan of arrangement, Aurora Cannabis (NYSE: ACB) (TSX: ACB) has acquired all of the issued and outstanding common shares of Hempco Food and Fiber (TSX-V: HEMP).

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To acquire shares of Hempco not already owned by Aurora, the company invested approximately C$63.4 million on a fully diluted basis.

Hempco is now a wholly-owned subsidiary of Aurora. The Hempco Shares will be delisted from the TSX Venture Exchange, and Aurora will apply to the relevant securities commissions for Hempco to cease to be a reporting issuer under Canadian securities laws.

Why Aurora Bought Hempco

Hempco is a provider of hemp-based foods, hemp fiber, and hemp nutraceuticals.

The company “provides Aurora with access to low-cost, high-volume raw hemp material for the extraction of primarily cannabidiol (CBD) and other cannabinoids, which is gaining recognition for potential health benefits across a wide range of applications,” Aurora said in a statement.

Aurora identified the potential of hemp-derived CBD early on, completing its first investment in Hempco in 2017, and has subsequently expanded its hemp-based infrastructure through targeted acquisitions and strategic partnerships.

By combing different segments, Aurora created Aurora Hemp, an integrated operating unit focused on the global hemp business.

“Through the addition of Hempco, we have assembled a world-class portfolio of high-quality hemp assets that together form the basis of a strong new operating division that will develop CBD-from-hemp around the world,” Aurora CEO Terry Booth stated.

“Aurora Hemp brings together the cultivars, strategic partners, brands, and distribution networks to service medical, consumer, and wellness markets and further advances Aurora’s entry into the US hemp food and hemp-derived CBD markets,” Booth added.

Shares Acquisition

Under the plan of arrangement, each Hempco shareholder will receive $1.04 per Hempco share, payable in common shares of Aurora at $12.01 per share, resulting in an exchange ratio of approximately 0.08659 Aurora shares for each Hempco share.

Under the terms of the plan, Aurora has issued a total of 2,610,642 shares and reserved for issuance a total of 242,602 shares issuable in lieu of Hempco shares upon exercise of outstanding Hempco stock options.

The number of Aurora shares issued and issuable as part of the arrangement represents approximately 0.26% of the outstanding shares of the company.

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