Canadian cannabis company Aurora Cannabis expands its recreational portfolio by announcing the acquisition of TerraFarma Inc., a parent company of Thrive Cannabis, an Ontario-based vertically integrated cannabis company.
Toronto-based TerraFarma Inc. acquired 100% of the shares of Thrive Cannabis in 2019.
According to the press release, Aurora will acquire all of TerraFarma's issued and outstanding shares for $38 million in cash and Aurora shares. Furthermore, Thrive will also be eligible for up to $20 million in shares, cash, or both, if it reaches specific revenue targets within two years.
The transaction is expected to close in Q4 of Aurora's 2022 fiscal year. This would help Aurora reach profitability by the first half of its 2023 fiscal year.
Aurora said it plans to put the Thrive team in charge of its Canadian recreational cannabis portfolio to advance its shift in focus to products such as dried flowers, pre-rolls, vapes, and concentrates.
Thrive, a licensed producer of super-premium cannabis concentrates and craft dried flowers, is most widely known for its award-winning flagship recreational brand, Greybeard Cannabis, launched in 2020.
Through the acquisition of TerraFarma, Aurora Cannabis adds two brands to its portfolio: Greybeard, a premium brand with a lineup of concentrates popular among budtenders and cannabis connoisseurs, and Being, a wellness-oriented brand known for its sublingual THC and CBD strips.
Born as a medical cannabis company serving Canada, Europe, and Australia, Aurora Cannabis launched a line of recreational cannabis products in the last years, including Aurora Drift, San Rafael '71, Daily Special, AltaVie, and Whistler.
In a press statement, Miguel Martin, CEO of Aurora, said the company wants to focus on acquiring talent and brands that align with Aurora's path to profitability.
In this perspective, the acquisition of TerraFarma meets Aurora Cannabis's criteria as the Thrive teams include cultivators who have gained trust with consumers and developed products that have been recognized and acclaimed by Canadian budtenders and industry players, according to Martin.
"We see a unique opportunity to leverage their expertise to deliver near and long-term benefits for both our recreational and medical markets," he said.
"We are excited to be joining a team that shares our vision for delivering the highest quality, premium cannabis products to consumers in a way that generates sustainable profitability," said Geoff Hoover, CEO of Thrive, in a press statement.
He added that combining Aurora Cannabis and TerraFarma will be transformative.
Following the announcement, Aurora Cannada stock, publicly listed in Toronto Stock Exchange and Nasdaq as ACB, jumped 10% before share came back down to 2%.
Although Aurora Cannabis will acquire TerraFarma for $38 million in cash and shares, it could pay up to $20 million to Thrive in shares, cash, or both should it reach revenue targets over the next two years and become a profitable acquisition by the first half of 2023.
The earnout consideration consists of up to $10 million for satisfying specific near-term revenue targets and up to $20 million for meeting specific long-term revenue targets within two years of the closing of the transaction, according to the transaction details provided by Aurora Cannabis.
The most significant change that Aurora Cannabis stock made is giving Thrive management a head role in operations, including Aurora's recreational business.
According to some experts, investors are still unsure that the acquisition may be a massive purchase that Aurora probably can't afford right now.
Just before the announcement of the acquisition of TerraFarma by Aurora Cannabis, the U.S.-based company Cresco Labs announced to acquire New York-based Columbia Care for $2 billion in an all-stock transaction.
Both announcements have driven consolidation in the cannabis space both in the United States and Canada.
