CanniMed Therapeutics Inc. said Wednesday that it needs time to review a surprise takeover offer from a rival licensed marijuana producer that sent its share surging on another volatile trading day for pot stocks amid speculation the latest move could spark a wave of consolidation.
"We advise shareholders to take no action until such time as the board has had the opportunity to fully consider and make a recommendation regarding the unsolicited offer," the company said in an a response to an unsolicited bid announced after the close of markets Tuesday.
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Aurora Cannabis Inc. announced an all-share offer worth up to $24 per share that it said already has support from shareholders representing 38 per cent of CanniMed's outstanding shares.
Vancouver-based Aurora said it submitted a proposal to CanniMed's board of directors Monday and has given the company until Friday to respond. If the board doesn't respond, it said it plans to launch a formal takeover bid.
But CanniMed said that it has not received a formal written offer from Aurora, adding it would review the terms set out in the press release and respond by the Friday deadline.
CanniMed cautioned that it considered Aurora's valuation per share to be inflated, since it was based on Aurora's share price as of Nov. 14 after a 125 per cent increase over the preceding 12 trading days.
It said that had the deal been proposed on Oct. 27, the implied value would have been $12.90 per CanniMed share.
Following news of the proposed deal, CanniMed's share price shot up $4.50 to close at $19.80, while Aurora's share price was down $0.18 to $6.23.
CanniMed also said it is already in talks to acquire marijuana company Newstrike Resources Ltd., a producer endorsed by members of the Tragically Hip.
Marijuana analyst Vahan Ajamian said this latest deal could spark merger and acquisition activity among the around 50 licensed producers in the burgeoning industry ahead of recreational legalization, slated for July 1.
"This could spark a wave of consolidation with the larger players 'gobbling up' the smaller ones," said Ajamian in a note.
Further consolidation could mean bigger price gains in smaller marijuana stocks, while to date the larger companies have seen the bulk of the share price gains in the past three months, said Ajamian.
If the acquisition is successful, it would boost Aurora's market capitalization to more than $3 billion and would see it serve about 40,000 active registered patients. That compares to 63,000 at Canopy Growth Corp., Canada's largest marijuana company.
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CanniMed, previously Prairie Plant Systems, was one of the first medical marijuana companies to be granted a Health Canada licence to produce in 2013.
Prior to that, Prairie Plant Systems had been the government's official marijuana provider on the earlier program enacted in 2000.
The company is focused on cannabis oil, a higher-margin product than dried bud.