Aurora Cannabis Inc. (NASDAQ:ACB) (TSX:ACB) has reached an agreement to acquire all of the issued and outstanding shares of TerraFarma Inc., the parent company of Thrive Cannabis.
Deal Details
The transaction is based upon aggregate consideration of $38 million, payable in cash and Aurora common shares plus two earnout amounts payable in Aurora shares or cash, if applicable, based on Thrive achieving certain revenue targets within two years of closing of the transaction.
The sum of $3 million of the Initial consideration is subject to a holdback to be released on the 18-month anniversary of the closing of the transaction subject to adjustment for any indemnification claims.
The earnout consideration consists of up to $10 million for satisfying certain near-term revenue targets and up to $20 million for satisfying certain long-term revenue targets within 2 years of the closing of the transaction, each payable in cash, Aurora Shares or a combination of both.
The deal is expected to close, subject to customary closing conditions, in the company’s fiscal fourth quarter of 2022.
Why It Matters?
The acquisition is expected to strategically strengthen Aurora's position in the Canadian market by placing the Thrive team in charge of Aurora's Canadian recreational portfolio, advancing the shift in focus to innovative premium products including dried flower, pre-rolls, vapour products, and concentrates.
It is anticipated that the deal will provide immediate positive Adjusted EBITDA to Aurora, and support the company's path to adjusted EBITDA profitability in the first half of fiscal 2023.
Moreover, the producer of super-premium cannabis concentrates and craft dried flower adds two new brands to Aurora's portfolio, including Greybeard and Being Cannabis, both of which have rapidly gained market share over the last twelve months and are expected to flourish with additional resources on the company's platform.
Thrive also brings a genetics library that has consistently delivered 24%+ THC potency, high yielding (80g+ / plant) and disease-resistant cultivars.
"This transaction supports our path to profitability while ensuring that we are strategic in our M&A activity,” Miguel Martin, CEO of Aurora, said. "As consolidation among licensed producers accelerates, it's vital that any transactions we make, now or in the future, be strategic, accretive, and centred around adding exceptional talent and brands that align with our path to profitability."
What’s Next?
Geoff Hoover, CEO of Thrive, said that he looks forward to “combining our best-in-class products and innovation pipeline with Aurora's depth of operational capabilities, robust route to market and shared focus on superior science and genetics that is critical for advancement in this sector.”
Photo: Courtesy of Aurora Cannabis Inc.
