Curaleaf and Aurora escalate takeover fight over share issuances
The hostile takeover battle between Curaleaf Holdings and Aurora Cannabis has escalated, with Curaleaf asking Alberta securities regulators to halt Aurora’s at-the-market share issuance program and Aurora accusing the company of trying to distract shareholders from what it calls an inadequate offer.
Curaleaf followed the regulatory filing with a September 15 letter urging Aurora shareholders to tender their shares and announcing a live shareholder question-and-answer session with Curaleaf Chairman and CEO Boris Jordan.
The developments mark a new phase in the proposed acquisition, which Greenway first reported in August. At that time, Curaleaf had announced its intention to take an unsolicited proposal directly to Aurora shareholders after the companies failed to reach a negotiated agreement.
Curaleaf formally commenced its offer August 18. The proposal would provide Aurora shareholders with 0.3463 Curaleaf subordinate voting shares and US$0.75 in cash for each Aurora share, subject to a maximum combined value of US$5 per share. Curaleaf valued the consideration at US$4 per Aurora share based on the companies’ unaffected trading prices and said it represented a 45% premium to Aurora’s 30-day volume-weighted average price as of August 10.
Aurora’s board has unanimously recommended that shareholders reject the offer by taking no action and not tendering their shares. The offer is currently scheduled to expire December 1, unless extended, accelerated, or withdrawn.
Curaleaf asks regulator to halt Aurora share sales
On September 14, Curaleaf announced an application asking the Alberta Securities Commission to stop Aurora from issuing additional shares through its at-the-market program while the takeover offer remains open. Curaleaf also requested an expedited hearing.
An at-the-market, or ATM, program allows a publicly traded company to issue and sell shares into the market over time at prevailing prices.
Curaleaf alleges that Aurora’s continued use of the program amounts to an improper defensive tactic because it increases the number of shares Curaleaf would have to acquire, raises the cost of the offer, and dilutes existing Aurora shareholders.
According to Curaleaf’s filing, Aurora issued approximately 2.81 million shares at an average price of US$3.04 per share after Curaleaf first expressed interest in a transaction in June. Curaleaf claims those issuances diluted shareholders by approximately 4.9% and increased the aggregate value needed to complete its offer by more than US$11 million.
Curaleaf also said the ATM program has resulted in approximately 10.8% dilution since Aurora established it in February.
“If management believes US$4.00 undervalues the company and the company has ample cash, why continue diluting its shareholders?” Jordan stated.
No ruling from the Alberta Securities Commission was included in the companies’ announcements. Curaleaf’s allegations remain subject to regulatory review.
Aurora defends financing program
Aurora responded later on the same day, arguing that its ATM program predates Curaleaf’s bid and was not created as a takeover defense.
The company said the program was publicly announced in February, more than six months before Curaleaf launched its hostile offer.
Aurora describes it as a financing tool intended to support strategic acquisitions, added cultivation capacity, and other growth opportunities in Canada and the United Kingdom.
Aurora also claims the program has been inactive for several weeks.
The company did not dispute in its response that shares had previously been issued through the program, but rejected Curaleaf’s characterization of those issuances.
“Our ATM program was established long before Curaleaf launched its inadequate hostile bid and was never designed as a response to it,” Aurora Executive Chairman and CEO Miguel Martin stated. “It is a long-standing capital allocation tool that supports Aurora’s growth strategy.”
Aurora said its recent acquisitions in the United Kingdom demonstrate how proceeds from the program can support its international strategy. Martin added that the board would use the program only when it determines that doing so is in the company’s best interests.
Aurora turned attention toward Curaleaf’s finances, asserting that Curaleaf carries more than US$1 billion in debt, financial obligations, and lease liabilities, including US$500 million in senior secured notes bearing 11.5% interest. Aurora contrasted that position with what it described as its own debt-free balance sheet and strong cash position.
Those figures were presented by Aurora as part of its argument against exchanging Aurora shares for a combination of cash and Curaleaf stock.
Additionally, Aurora raised its own complaint with the Alberta Securities Commission on September 2 concerning what it described as regulatory deficiencies in Curaleaf’s offer.
The company did not detail the status of that complaint in its September 14 response.
Curaleaf takes its case directly to shareholders
Curaleaf renewed its appeal to investors in a September 15 letter, asking shareholders to accept the offer and arguing that a combined company would provide greater scale, geographic diversity, and exposure to potential U.S. regulatory changes.
“Aurora shareholders have an important choice to make,” Jordan stated. “They can accept a 45% premium and become owners of the world’s largest and most diversified cannabis company or remain invested in a shrinking business that is burning cash and getting less profitable by the day.”
Aurora disputes that characterization and maintains that Curaleaf’s offer undervalues its global medical cannabis business, EU-GMP production assets, cash position, and international growth prospects.
Curaleaf projects that the combined businesses would operate in 17 countries and have more than US$1.5 billion in trailing 12-month revenue, nearly US$350 million in adjusted earnings before interest, taxes, depreciation, and amortization, and at least US$40 million in expected annual cost savings. Those projections are Curaleaf estimates and depend on completion and successful integration of the proposed transaction.
Curaleaf also announced that Jordan will host a live webcast and shareholder question-and-answer session September 17 at 10:30 a.m. Eastern time.
Curaleaf encourages shareholders to tender their shares, while Aurora’s board urges rejection of the bid by taking no action.
The regulatory dispute over Aurora’s ATM program adds another unresolved issue as the December 1 offer deadline approaches.
