stats
globeinteractive.com: Making the Business of Life Easier

   Finance globeinvestor   Careers globecareers.workopolis Subscribe to The Globe
The Globe and Mail /globeandmail.com
Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space


Search

space
  This site         Tips

  
space
  The Web Google
space
   space



space

  Where to Find It


Breaking News
  Home Page

  Report on Business

  Sports

  Technology

space
Subscribe to The Globe

Shop at our Globe Store


Print Edition
  Front Page

  Report on Business

  National

  International

  Sports

  Arts & Entertainment

  Editorials

  Columnists

   Headline Index

 Other Sections
  Appointments

  Births & Deaths

  Books

  Classifieds

  Comment

  Education

  Environment

  Facts & Arguments

  Focus

  Health

  Obituaries

  Real Estate

  Review

  Science

  Style

  Technology

  Travel

  Wheels

 Leisure
  Cartoon

  Crosswords

  Food & Dining

  Golf

  Horoscopes

  Movies

  Online Personals

  TV Listings/News

 Specials & Series
  All Reports...

space

Services
   Where to Find It
 A quick guide to what's available on the site

 Newspaper
  Advertise

  Corrections

  Customer Service

  Help & Contact Us

  Reprints

  Subscriptions

 Web Site
  Advertise

  E-Mail Newsletters

  Free Headlines

  Globe Store New

  Help & Contact Us

  Make Us Home

  Mobile New

  Press Room

  Privacy Policy

  Terms & Conditions


GiveLife.ca

    

PRINT EDITION
Cannabis stock rally imperils CanniMed, Newstrike deals
space
space
By CHRISTINA PELLEGRINI, JEFFREY JONES
  
  

Email this article Print this article
Wednesday, January 10, 2018 – Page B1

The frenzied run-up in marijuana stocks is threatening the sector's highest-profile takeover deals.

Aurora Cannabis Inc.'s hostile bid for CanniMed Therapeutics Inc., and CanniMed's friendly deal to acquire Newstrike Resources Inc. - both all-stock proposals - could get blown off course in their late stages by sharp gains in the targets' shares that are making the transactions unattractive.

CanniMed's stock settled on Tuesday at 11 per cent above a $24-ashare exchange limit proposed by Aurora.

Because of that cap, CanniMed shareholders would get fewer Aurora shares for each of their own holdings than first proposed, and miss out on much of the recent rally that has seen Aurora's share price more than double.

In the case of Newstrike, its stock has soared close to 330 per cent over the past five trading days and was halted twice on Tuesday amid the volatility. The tiny company's market capitalization, at more than $1-billion, is now almost double that of CanniMed's. The exchange ratio - 1,000 shares of Newstrike for 33 of CanniMed's - is fixed, so investors can currently sell their holdings into the market at more than twice the bid value.

"What's happening is you're seeing a lot of speculation driving up the prices, and prices are being driven up further by FOLO - fear of losing out. There's no rational reason for it but people see a company doing well on limited good news," said Ranjeev Dhillon, a lawyer at Bennett Jones who specializes in cannabis deals.

Suitors may have to start sweetening offers with cash to get deals done, Mr. Dhillon said.

Investors are carving out positions in Canadian cannabis companies ahead of Ottawa's legalization of recreational pot this summer. Many of the shares are trading at massive - and growing - multiples to revenue.

To support the friendly buyout, Newstrike shareholders would have to be convinced that the combination with CanniMed offers long-term strategic benefits that outweigh any short-term gains, said Russell Stanley, analyst at Echelon Wealth Partners.

Aurora's bid for CanniMed is looking more tenuous. It offered 4.53 Aurora shares for each CanniMed share, but the variable ratio puts the current exchange at 1.8 Aurora shares for each CanniMed.

"We'll have a lot more clarity with the shareholder meetings occurring over the next couple of weeks, but if I was a CanniMed shareholder and I've got stock that I could sell for $25 or $26 in cash or take $24 of Aurora paper, I would take the cash, obviously, by selling it into the open market," Mr. Stanley said.

"So at this point where CanniMed is trading, the hostile bid from Aurora won't be accepted, and either a better bid is coming or the offer will just die."

Cam Battley, chief corporate officer at Aurora, gave no indication that the company is rethinking its plans.

"Remember, this sector has shown a certain amount of volatility and has pullbacks in the past, so we'll see what happens over the coming weeks," he said.

Aurora's hostile bid is conditional on CanniMed abandoning its takeover of Newstrike. More than 50 per cent of Newstrike shares are committed to the deal with CanniMed, per the circular. It requires the support of two-thirds of Newstrike shareholders at a meeting in Toronto on Jan. 17. CanniMed is hosting its meeting on Jan. 23. Holders of at least 36 per cent of its shares have pledged their support for the Aurora deal.

"The CanniMed deal we entered into, we still believe is a strong deal for our shareholders," said Jay Wilgar, Newstrike's chief executive officer. "The stock has been trading like this for a few days. Believe me, we're flattered that people are excited about our story and they obviously are."

When asked if CanniMed is going to sweeten its offer, he said: "I don't know. You have to ask them that."

CanniMed CEO Brent Zettl declined to say if the company might reprice its bid, but said that CanniMed's share price has been held back by the Aurora cap. "We are confident that both groups of shareholders will realize the value which is when the Newstrike deal is completed," he said.

AURORA CANNABIS (ACB)

CLOSE: $13.63, DOWN 26¢

CANNIMED (CMED)

CLOSE: $26.62, DOWN 64¢


Huh? How did I get here?
Return to Main Paul_Sullivan Page
Subscribe to
The Globe and Mail
 

Email this article Print this article

space  Advertisement
space

Need CPR for your RSP? Check your portfolio’s pulse and lower yours by improving the overall health of your investments. Click here.

Advertisement

7-Day Site Search
    

Breaking News



Today's Weather


Inside

Rick Salutin
Merrily marching
off to war
Roy MacGregor
Duct tape might hold
when panic strikes


Editorial
Where Manley is going with his first budget




space

Columnists



For a columnist's most recent stories, click on their name below.

 National


Roy MacGregor arrow
This Country
space
Jeffrey Simpson arrow
The Nation
space
Margaret Wente arrow
Counterpoint
space
Hugh Winsor  arrow
The Power Game
space
 Business


Rob Carrick arrow
Personal Finance
space
Drew Fagan arrow
The Big Picture
space
Mathew Ingram arrow
space
Brent Jang arrow
Business West
space
Brian Milner arrow
Taking Stock
space
Eric Reguly arrow
To The Point
space
Andrew Willis arrow
Streetwise
space
 Sports


Stephen Brunt arrow
The Game
space
Eric Duhatschek arrow
space
Allan Maki arrow
space
William Houston arrow
Truth & Rumours
space
Lorne Rubenstein arrow
Golf
space
 The Arts


John Doyle arrow
Television
space
John MacLachlan Gray arrow
Gray's Anatomy
space
David Macfarlane arrow
Cheap Seats
space
Johanna Schneller arrow
Moviegoer
space
 Comment


Murray Campbell arrow
Ontario Politics
space
Lysiane Gagnon arrow
Inside Quebec
space
Marcus Gee arrow
The World
space
William Johnson arrow
Pit Bill
space
Paul Knox arrow
Worldbeat
space
Heather Mallick arrow
As If
space
Leah McLaren arrow
Generation Why
space
Rex Murphy arrow
Japes of Wrath
space
Rick Salutin arrow
On The Other Hand
space
Paul Sullivan arrow
The West
space
William Thorsell arrow
space





Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space

© 2003 Bell Globemedia Interactive Inc. All Rights Reserved.
Help & Contact Us | Back to the top of this page