Cronos (CRON) confirmed this morning that it has sold all of its common shares in the capital of Whistler Medical Marijuana Corporation, representing approximately 19% of Whistler’s issued and outstanding common shares, to Aurora Cannabis (ACB) for a total purchase price of approximately C$175 million, payable by the issuance of common shares in the capital of Aurora, and subject to certain working capital adjustments and holdbacks.
One of the biggest knocks against Aurora has been that costly acquisitions using its shares have diluted potential future earnings per share for existing investors. As a result, Aurora shares are down nearly 3% in Monday’s trading session.
As a reminder, on January 14, Aurora announced that it will purchase Whistler Medical Marijuana for C$175 million in an all-stock deal. Today, the company completed the acquisition of all the issued and outstanding shares of Whistler.
Whistler is a craft cannabis grower based in Whistler, British Columbia. Whistler’s craft grows are comparatively small — about 5,000 kilograms/year. Many of Whistler’s products are certified organic: The medical cannabis menu sorts products into WMMC+ (non-organic) and FVOPA Organic (Fraser Valley Organic Producers Association), for example. The Whistler brand has broadened Aurora’s lineup—which includes brands like Aurora, AltaVie and San Rafael ‘71—while boosting Aurora’s visibility in the populous and pot-loving province of British Columbia.
Aurora CEO Terry Booth commented, “Now that this transaction is complete, we intend to accelerate development of Whistler and leverage its iconic brand globally. Applying certain of our best practices to the Whistler cultivation protocols, we anticipate an increase in capacity of the Pemberton facility beyond the stated 5,000 kg annual production target. Furthermore, in pursuing EU GMP certification, we expect, once certified, to offer Whistler’s premium organic flower and derivative products in the much higher margin EU medical cannabis market, further increasing the accretive nature of this transaction. Whistler and Aurora are very much aligned with respect to cannabis culture and community. We expect a swift and successful integration with Whistler, our latest partner.”
Christopher Pelz, CEO and Founder of Whistler, added, “Aurora represents an ideal partner for Whistler, enabling us to maintain our unique craft identity while leveraging the vast resources of Aurora’s large international footprint to rapidly scale our growth and margin profile. We look forward to integrating with the impressive organization that Aurora has developed to continue to produce the highest quality, organic certified cannabis for our medical and consumer markets.”
CEO of Cronos Mike Gorenstein concluded, “We’d like to thank and congratulate Whistler for their partnership over the past two years. Whistler’s commitment to creating high-quality products and establishing a premium brand has generated value for consumers and investors alike. We are proud to have been part of their growth and look forward to their progress through this venture.”
As a result of the closing of the Transaction, Cronos has received approximately 2.5 million Aurora Common Shares with an aggregate value of approximately C$24.6 million based on an issue price of $9.77 per Aurora Common Share, which represents the five-day volume weighted average price (VWAP) of Aurora Common Shares immediately prior to closing of the Transaction. In addition, the Company will receive further Aurora Common Shares valued at an aggregate of approximately C$7.6 million upon the satisfaction of certain specified milestones. The exact number of Aurora Common Shares to be issued to the Company following the satisfaction of each such milestone will be determined in reference to the five-day VWAP of Aurora Common Shares immediately prior to the achievement of the applicable milestone.
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