Big green: Aurora Cannabis to buy MedReleaf in $2.5B takeover

Consolidation in Canada’s Mary Jane industry just took a big toke, with 2 of the largest firms agreeing on a massive merger.

May 17, 2018

The Canadian Broadcasting Corporation (CBC) reports that Aurora Cannabis will buy med-weed firm MedReleaf for $2.5B in stock in the biggest mary-j-merger ever.

The combined firm could be worth as much as $7B — enough to smoke out the competition and make Aurora the kingpin of the weed industry.

A drug deal made just in time

The deal comes just weeks before Canada looks to legalize recreational cannabis. Aurora is leading the charge to cut costs and improve efficiency (by way of consolidation) before the floodgates open.

If (and most likely, when) shareholders give their OK, the new company’s facilities in Canada and Denmark, plus global distribution networks will potentially give it enough real estate to produce 1.2m pounds of tree a year.

But the price tag is pret-ty steep for ‘potential’

This is a gigantic swing in a budding industry (not sorry) that has yet to produce major dividends. Many Canadian growers make slim profits as they push to expand and, according to Bloomberg, MedReleaf is no exception.

In 2017, the company only profited $8.6m on revenues of $31.5m, meaning Aurora’s takeover values MedReleaf at almost 163 times its earnings before interest and taxes.

But, betting on “potential” is like taking a hit out of a 10-foot bong: Maybe you won’t call your mom afterwards to tell her you’re going to die, but, there’s always a chance you will.

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