By Armina Ligaya
THE CANADIAN PRESS
TORONTO _ Licensed marijuana producer Aphria Inc. has struck an $826-million deal to buy Nuuvera Inc. to fuel its international expansion efforts, marking the latest move by a Canadian cannabis company to extend its global reach while U.S. competition is kept at bay.
The cash-and-stock deal to buy the Toronto-based medical cannabis firm builds on a partnership between the companies as it combines Aphria’s production with Nuuvera’s expertise in cannabis processing and extraction.
Nuuvera, which is in the final stages under Health Canada’s process to become a licensed marijuana producer, has business relationships in the Middle East, Africa and Europe, including a license to import medical cannabis to Italy for sales to domestic pharmacies.
“In all, this positions us to grow internationally and realize the potential of these emerging cannabis markets,” Aphria chief executive Vic Neufeld told analysts on a conference call Monday.
Many Canadian licensed marijuana producers have been racing to international markets that have larger populations, and market demand, than at home.
The latest examples include Canopy Growth Corp.’s plans announced in December to establish a 40,000-square-metre production facility in the Danish city of Odense, with the aim of exporting product to other federally legal jurisdictions in the European Union. Meanwhile, Aurora Cannabis Inc. is also retrofitting a greenhouse in Odense and said announced earlier this month it won a tender to supply medical cannabis to the Italian government through the country’s Ministry of Defence.
But the recent change in marijuana policy tone in the U.S., where pot remains illegal at the federal level, has further reinforced Canadian marijuana companies’ advantage on the world stage for now.
In December, U.S. Attorney General Jeff Sessions rescinded an Obama-era memo which suggested the federal government would not intervene in states where the drug is legal, opening up the door for several states to legalize pot for medical and recreational purposes. But in a new memo, President Donald Trump’s top law enforcement official said he would let federal prosecutors where cannabis is legal decide how aggressively to enforce federal law.
Analysts say this guidance introduces additional uncertainty and suppresses the rise of large U.S. marijuana companies to challenge Canadian players as they expand globally.
The Aphria-Nuuvera deal is also the latest sign of consolidation, less than a week after Edmonton-based Aurora Cannabis reached a friendly billion-dollar to acquire rival licensed producer CanniMed Therapeutics Inc. for a mix of cash and stock in the biggest acquisition the marijuana sector has seen. As well, earlier this month Aphria announced a deal to buy B.C.-based Broken Coast Cannabis Inc., a transaction valued at $230 million.
Analysts expect consolidation to accelerate in the sector ahead of the legalization for recreational use of marijuana this summer.
Under the terms of the deal, Nuuvera shareholders will receive $1 in cash plus 0.3546 of an Aphria share for each share they hold. Based on Aphria’s 10-day volume weighted average price of $21.15, the offer is worth $8.50 per share.
The transaction is subject to customary closing conditions including approval by Nuuvera shareholders. Nuuvera shares closed at $7 on Friday, while Aphria shares finished last week at $20.16.
Assuming Aphria closes its acquisition of Broken Coast, that it also agreed to buy using stock and cash, Nuuvera shareholders will own approximately 14.8 per cent of the combined company.