I disagree, an acquisition at the current stage would be a departure from Aurora's acquisition strategy so far.
Look at some of their other full acquisitions:
Pedanios Gmbh: Germany's largest distributor of cannabis to pharmacies
Canvas RX: the largest medical cannabis patient outreach service in Canda
Larssen: an industry leading automated greenhouse developer for over 30 years
BC Northern Lights: leading supplier of indoor growing equipment for 16 years + a big range of proprietary growing products
Urban Cultivator: similar to BCNL, proprietary products, growing revenues, operating for 7 years
Cannimed: Cannabis oil producer and strong biopharmaceutical research team who have been producing since 2001
These are all strong, revenue-producing companies which have immediate strategic value.
There are only 2 acquisitions which are comparable to Cann Group:
Peloton Pharmaceuticals: a late-stage ACMPR-applicant who had a 40,000 square foot cannabis production facility which was 80% complete
H2 Biopharma: another late-stage ACMPR-applicant who had a 48,000 square foot cannabis production facility which was also 80% complete
Both of these companies had facilities which were on the verge of commencing operations and creating revenues. Peloton was acquired out of bankruptcy protection for $7m whereas H2 was acquired for $10m, with a further $15m contingent on performance milestones; completion of the Facility, the granting of cultivation and sales licenses by Health Canada, and municipal approval for expansion of the facility (which could be up to or beyond the scale of the Company's 800,000 square foot Aurora Sky facility).
Compare those companies to Cann Group. Cann has only just signed its design and consulting agreement for their phase 3 facility and a site hasn't been selected yet, nor have planning approvals been received. The facility will be 23,500m2 which is around 250,000 square feet.
Aurora holds 22.9%, so an acquisition of all remaining shares at $4.50 would cost Aurora ~C$468 million (AU$484m). Ignoring the funds already invested, the acquisition would cost over 10x what they paid for Peloton per square foot. Even compared to the full fee for H2 (including contingencies), Cann Group would cost 3.6x more per square foot with a longer wait and far more costs for Aurora to take on before reaching production. You could argue that taking over at this stage would provide them with control of that facility's development but the design agreement is with Aurora Larssen, so Aurora already have control over the design and construction of the Cann Group facility.
Let's look at the logistics of a takeover right now. As of January 2018, Aurora had $320 million in cash with another $179.2 million in marketable securities (including Cann Group). They won't liquidate their marketable securities because they're strategic investments, and their 2018 Q2 report stated they had sufficient funds to cover operations and to execute their domestic and international growth strategy until February 2019, so that probably rules out capital raising in the short term. If they went for an all-stock acquisition like they did with H2, they'd have to offer almost 60 million shares at their current value (C$7.95) which is over 10% of the Aurora shares currently outstanding, which seems unlikely. So they would be looking at a split of stock and cash, which would reduce their equity and their liquidity, so they'd be looking for immediate justification for doing so (as with all of their other acquisitions). Keep in mind, Aurora's share price is also at its lowest point since December last year.
So does that justification exist right now?
Aurora already have:
• Aurora Mountain: 55,200 square feet, currently producing
• Aurora Vie: 40,000 square feet, currently producing
• Aurora Sky: 800,000 square feet, nearing completion
• Aurora H2: 48,000 square feet, nearing completion
• Aurora Nordic: 1,000,000 square feet, first phase complete end of this year
• Aurora Sun: 1,200,000 square feet, completion mid-to-late 2019
Adding another 250,000 in the first half of 2019 is a drop in the bucket. Aurora are already Cann Group's largest shareholder with a director on its board and full control of the company designing and building its facility, so why initiate a takeover now?
Long-term, I agree that a takeover makes sense to leverage Aurora's existing infrastructure into a powerful position in the Australian market, but history suggests it'll happen when Cann Group's facility is around 80% complete. I'd expect early-to-mid 2019.
In the meantime, securing a holding of over 25% would give them the power to block compulsory acquisitions and special resolutions, protecting their investment and deterring other potential suitors.
All my opinion, DYOR etc
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