Aurora Cannabis Inc. just announced the acquisition of mass CBD retail platform Reliva. The Edmonton-based cannabis giant will use the acquisition to expand into the United States, launching Aurora USA.
Under the terms of the all-share transaction, members of Reliva will receive approximately $40 million USD of Aurora common shares. The transaction also includes a potential earn-out of up to a maximum of $45 million payable in shares or cash if Reliva achieves certain financial targets within the next two years.
Reliva is one of America’s top-rated retail hemp-derived CBD brands. You can find Reliva products sold in 20,000 mass retail locations across the United States.
Because of the acquisition, Aurora Cannabis officially has a presence in the United States. The Canadian company sells recreational cannabis products in Canada and medicinal cannabis in Europe. Now, they also sell hemp-derived CBD in the United States through the new Aurora USA division.
The transaction is expected to close in June 2020.
“The transaction represents the culmination of a multi-month strategic evaluation of the U.S. hemp-derived CBD industry,” explains Aurora in a press release announcing the acquisition earlier today.
The press release goes on to praise Reliva for its focus on regulatory testing and compliance, proven management, deep relationships with trade partners, and track record of growth and profitability.
“Together, Aurora and Reliva will partner to create an international cannabinoid leader that we believe can deliver robust revenue and profitable growth,” said Michael Singer, Executive Chairman and Interim CEO of Aurora.
“We have taken the time necessary to carefully assess the Company's entry into the U.S. market and we firmly believe that the combination with Reliva will create significant long-term value as Reliva provides us options to grow in hemp-derived CBD internationally.”
CBD is expected to grow to a $24 billion retail market by 2025. Reliva ranked number one in topicals and number two in overall market share. It’s also the only CBD company in the three largest U.S. wholesale distributors, and they have contracts with leading retailers – including 8 of the top 20 national convenience store chains.
The transaction is immediately accretive to Aurora shareholders. The acquisition also aligns with Aurora’s transformation plan announced in February 2020.
Reliva is debt-free, and the acquisition requires no capital expenditures or additional working capital investment.
Reliva CEO Will Become President of Aurora USA
Aurora also praised the acquisition of Reliva’s experienced management team, which has 40+ years of sales and marketing experience. The company is led by Miguel Martin, a 25-year consumer packaged goods (CPG) veteran.
Miguel Martin will be named president of Aurora USA after the acquisition. The rest of the Reliva management team will remain in place after the acquisition.
Aurora expects the acquisition to help grow its strong position in the global medical cannabis market, the Canadian recreational cannabis market, and the hemp-derived CBD cannabis market in the United States.
Aurora’s stock (TSX: ACB) is down 12.70% on May 20. Aurora announced the acquisition after markets closed.
The company’s stock has been on a long descent for over a year. In May 2019, ACB was priced at $140. The stock bottomed out at $9 in May 2020, although it has experienced a slight jump over the last week, rising to around $18 CAD.
While the markets haven't opened yet, the Aurora acquisition is already pushing the pre-market price up 34%. It will be interesting to see how this unfolds throughout the day.