- Aurora Cannabis announced its intention to acquire the organic marijuana producer Whistler Medical Marijuana Corporation on Monday.
- The all-stock deal is valued at up to $132 million ($175 million CDN).
- Analysts say the deal gives Aurora a leg-up on branding power, as advertising is heavily restricted in the Canadian marijuana industry.
Aurora Cannabis on Monday said it's acquiring Whistler Medical Marijuana Corporation, an organic cultivator based in Whistler, British Columbia, in an all-stock deal worth up to $132 million ($175 million CDN).
The deal follows a string of high-profile acquisitions Aurora made in building out its domestic and international footprint last year, including the takeover of publicly traded MedReleaf in a $2.3 billion stock deal. It's also the latest deal in what has already been a hot few weeks for M&A in the cannabis industry.
"Whistler's brand is golden," said Cam Battley, Aurora's Chief Corporate Officer in a Monday interview with Business Insider.
Organic-certified marijuana is a "distinct market segment that delivers higher margins," said Battley. "Their products command a significant price premium in stores."
Read more: Marijuana M&A is already hot in 2019, with a pot tech-vape tie-up worth $210 million
Whistler is "one of the last pieces of the puzzle," to be a fully-integrated cannabis company, Battley said, adding that Aurora expects to make "fewer significant acquisitions" for the domestic marijuana market.
As well, Aurora hopes to be the first major cannabis player to sell organic, Canadian-grown marijuana in international markets like Germany, Battley said.
Capitalizing on 'brand appeal'
Analysts said the Whistler deal gives Aurora a leg-up on branding power, in an industry where advertising is heavily restricted.
Aurora hopes to capitalize on Whistler's "brand appeal"— Whistler is a world-famous ski town and vacation destination — and expand its footprint into Western Canada, the company said. And British Columbia has long been famous for the quality of its marijuana.
"Due to the nascent stage of the industry, we believe Whistler provides Aurora with one of only a few established brands in Canada (albeit a modest one) in an industry that imposes strict regulations on branding/advertising," Matt Bottomley, an analyst at the investment bank Canaccord Genuity said in a Monday note to clients.
Founded in 2013, Whistler is one of Canada's original 10 licensed marijuana cultivators. The company operates two indoor marijuana cultivation facilities in British Columbia, including one under construction in Pemberton. Once running up to full capacity, Whistler expects to have a combined production capacity of 5,000 kg per year, and the company holds agreements to sell medical cannabis to the Cayman Islands and Australia.
Aurora's stock was up around 2.5% at midday on Monday, after hitting a high of $6.77 per share.
As well, Whistler has a suite of organic-certified derivative products, including high-THC and CBD oils, which Aurora says would expand its product offerings.
"This transaction adds an iconic, organic certified BC-based brand with exceptional traction and a significant price premium in both the medical and retail markets," said Terry Booth, Aurora's CEO, in a press release.
Stoic Advisory, a boutique investment bank, acted as an advisor on the deal and McMillan LP acted as legal counsel to Aurora.
In an interesting wrinkle to the deal, Cronos Group, another publicly traded marijuana cultivator and a rival to Aurora, owns a 21.5% equity stake of Whistler. Altria, the tobacco-maker behind Marlboro, invested $1.8 billion into a 45% equity stake of Cronos Group late last year.
Entering the US market
In terms of what's next for Aurora, Battley said the firm is "all over the Farm Bill."
"We'll be unveiling our strategy to enter the US market over the next few months," said Battley. The Farm Bill, signed into law by President Donald Trump last year, legalized hemp nationwide.
Canopy Growth, a publicly traded Canadian marijuana cultivator and one of Aurora's competitors, on Monday unveiled a plan to produce hemp in New York state.
Hemp is a source of CBD, or cannabidiol, a non-psychoactive component of marijuana that's become a popular ingredient in many food-and-beverage products.
This story has been updated with comments from Cam Battley, Chief Corporate Officer at Aurora Cannabis.
Sign up here for our weekly newsletter Wall Street Insider, a behind-the-scenes look at the stories dominating banking, business, and big deals.
- Read more:
- Marijuana could be the biggest growth opportunity for struggling beverage-makers as millennials ditch beer for pot
- Meet the bigshot lawyers who are turning weed into a $194 billion industry
- A weed-tech startup backed by an early Juul investor and Canopy Growth just raised $12 million
- Marijuana companies are using a 'backdoor' strategy to tap the public markets — and it's fueling an M&A boom
Join the conversation about this story »
NOW WATCH: Bernie Madoff was arrested 10 years ago — here's what his life is like in prison