Pot Takeover Battle Heats Up as CanniMed Pushes Back on Aurora
(Bloomberg) -- The takeover battle between two Canadian medical marijuana producers is turning more acrimonious as CanniMed Therapeutics Inc. is raising new concerns that securities laws may have been violated by Aurora Cannabis Inc.’s C$582 million ($453 million) offer.
CanniMed has asked regulators in Saskatchewan and Ontario to weigh in on several complaints, including that Aurora’s hostile takeover bid be considered an “insider bid,” the company said Monday in a statement. The first company was involved in a long due diligence process to acquire Newstrike Resources Ltd. at the time of Aurora’s offer and lawyers need to take a “deeper dive” to determine if there was any breach of securities laws, said CanniMed Chief Executive Officer Brent Zettl.
CanniMed directors Rob Duguid and Doug Banzet disagreed with the decision to acquire Newstrike and along with the locked-up shareholders decided to “circumvent the board’s function and seek to usurp and frustrate the decisions of the board,” CanniMed alleges in a notice of application to regulators. Duguid resigned from the board of directors effective Nov. 17.
“We had two directors on our board who were essentially shopping the company around as joint actors with Aurora and coming in at nearly the last minute to make an informal offer for the company,” Zettl said in a telephone interview from Toronto. ”It just speaks to serious questions about confidentiality and all kinds of breaches.”
On Nov. 14, Aurora, which has a market value of C$2.9 billion, made an unsolicited offer to acquire CanniMed for C$24 a share in what would be the largest takeover in the country’s rapidly growing pot market. CanniMed dropped 0.5 percent Monday to close at C$19.87 in Toronto.
Shareholders representing 38 percent of issued CanniMed shares had concerns about the way the company was being managed and approached Aurora about a deal, said Cam Battley, Aurora’s executive vice president. Aurora wasn’t hunting for a Canadian acquisition at the time, he said.
“They’re cobbling together whatever they can, and thus far, it isn’t working,” Battley said by phone. “All of this will be dealt with in court.”
CanniMed applied for orders against Aurora with the Financial and Consumer Affairs Authority of Saskatchewan and the Ontario Securities Commission. The Financial and Consumer Affairs Authority of Saskatchewan has received the application and is in the process of reviewing it, said Dean Murrison, the director of the securities division. The OSC didn’t immediately respond to a request for comment from Bloomberg News.
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