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CanniMed Commences Legal Action against the Aurora Cannabis Hostile Bid



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- CanniMed has commenced legal action against Aurora for regulatory orders that, among other things, the Hostile Bid is an "insider bid" for the purposes of applicable Canadian securities laws and for certain non-compliance with applicable Canadian securities laws

- Newstrike presents an attractive and accretive acquisition that will make CanniMed shareholders owners in a premier global cannabis company with the opportunity for significant financial returns

- Aurora's Hostile Bid attempts to entice shareholders with phantom value for their CanniMed shares that is based on an inflated and unsustainable share price

- For more information about the Newstrike Acquisition or Aurora's Hostile Bid, contact Kingsdale Advisors at 1-888-518-1554 or by email at or visit

CanniMed Therapeutics Inc. ("CanniMed" or the "Company") (TSX:CMED) today announced that, in connection with Aurora Cannabis Inc.'s ("Aurora") hostile bid (the "Hostile Bid") to acquire all of the common shares of the Company ("CanniMed Shares") for consideration consisting of common shares of Aurora, it has applied to the Financial and Consumer Affairs Authority of Saskatchewan (the "FCAAS") and the Ontario Securities Commission (the "OSC") for orders that, among other things, the Hostile Bid is an "insider bid" for the purposes of applicable Canadian securities laws, on the basis that SaskWorks Venture Fund Inc., Apex Investments Limited Partnership, Golden Opportunities Fund Inc. and Vantage Asset Management Inc. (collectively the "Locked-up Shareholders") have acted jointly and in concert with Aurora. The purpose of the legal action is to level the playing field for shareholders of CanniMed (the "CanniMed Shareholders") in light of the coercive Hostile Bid, including the lock-up agreements entered into by Aurora with each of the Locked-up Shareholders. Specifically, CanniMed is requesting orders from the FCAAS and the OSC that:

  • Aurora and the Locked-Up Shareholders are "joint actors" for purposes of Multilateral Instrument 61-101 Protection of Minority Shareholders in Special Transactions ("MI 61-101");

    The CanniMed Shares of the Locked-Up Shareholders be excluded from the 50 per cent minimum tender condition contained in section 2.29.1(c) of National Instrument 62-104 - Take-Over Bids and Issuer Bids ("NI 62-104");
  • The Hostile Bid is an "insider bid" for purposes of MI 61-101 and consequently Aurora be required to obtain a formal valuation in connection with the Hostile Bid and otherwise comply with the requirements in Part 2 of MI 61-101;
  • The Hostile Bid be cease-traded until 105 days after a take-over bid circular that complies with the rules for an "insider bid" as required by MI 61-101, is delivered to the CanniMed Shareholders;
  • Aurora is required to retract and correct several materially false and misleading statements in connection with the Hostile Bid; and
  • Each of the Locked-Up Shareholders failed to issue news releases and file Early Warning Reports as required by Part 5 of NI 62-104 and Part 3 of National Instrument 62-103 - The Early Warning System and Related Take-Over Bid and Insider Reporting Issues.

In addition, as previously disclosed, Aurora has applied for relief from the applicable Canadian securities regulatory authorities to accelerate the expiry time of the Hostile Bid to a date that is no less than 35 days from the date the Hostile Bid was made and to cease trade CanniMed's shareholder rights plan. CanniMed adopted the rights plan to (i) encourage fair treatment of the shareholders of the Company in connection with potential acquisition transactions of the Company, (ii) ensure that CanniMed shareholders have the opportunity to vote on the Newstrike Acquisition, and (iii) ensure that shareholders are not coerced into tendering to the Hostile Bid. CanniMed is vigorously opposing Aurora's applications and attempts to deprive CanniMed and CanniMed Shareholders of the time necessary to consider alternatives to the Hostile Bid and to ensure a fair vote on the Newstrike Acquisition.

In addition, CanniMed has submitted a cross-application to this application seeking an order that the exemption created by section 2.2(3) of NI 62-104 to the restrictions on purchases during a take-over bid found in section 2.2(1) of NI 62-104 shall not apply to Aurora or the Locked-Up Shareholders.


The Company today also announced that it has filed on SEDAR and will mail both today:

  • A Director's Circular in response to the take-over bid circular of Aurora recommending that CanniMed Shareholders reject the Hostile Bid; and
  • A Management Information Circular urging CanniMed Shareholders to vote their GREEN proxy in favour of the Company's acquisition of all of the issued and outstanding shares of Newstrike Resources Ltd. ("Newstrike") (the "Newstrike Acquisition").

Based on the advice of its independent financial and legal advisors, CanniMed's board of directors (the "Board") recommends CanniMed Shareholders vote their GREEN proxy to approve the Newstrike Acquisition, which will lead to significant value creation for all CanniMed Shareholders. The Board also unanimously concluded that the Hostile Bid significantly undervalues the CanniMed Shares and is not in the best interests of the Company or its shareholders. The Board urges CanniMed Shareholders to reject the Hostile Bid by taking no action. Shareholders are advised to not tender their CanniMed Shares to the Hostile Bid.

Now is NOT the time to tender to Aurora's Hostile Bid because CanniMed is poised to capitalize on a significant market opportunity in a real way with the Newstrike Acquisition.

By refusing to tender, CanniMed Shareholders will send an important message: They will not allow Aurora to block them from maximizing the value of their investment in CanniMed.

Each of the circulars contains a letter to shareholders outlining the clear benefits of the Newstrike Acquisition and warns about the numerous concerns associated with Aurora's Hostile Bid.


By approving the Newstrike Acquisition, CanniMed Shareholders can create a premier cannabis company that is positioned to offer innovative, high-quality products with two distinct top-tier brands that are each well-positioned to address key product trends and emerging drivers of growth in both the medical and adult use recreational cannabis markets. Taking this step will make CanniMed more valuable to any future acquiror.

The cannabis market is at an important tipping point for investors. CanniMed is continuing to build a sustainable platform for growth and value creation based on the Company's longevity and deep understanding of the industry. The optimal way to participate in this market is by ensuring CanniMed Shareholders have exposure to the medical cannabis market and the soon-to-be booming recreational market. Only the Newstrike Acquisition will do that.

CanniMed is more valuable with Newstrike. Upon completion of the Newstrike Acquisition, the combined company will offer near term opportunities for significant synergies as well as a clear pathway to volumes and EBITDA growth; strong potential for multiple re-rate; and visibility on near and long-term share price appreciation. Together, CanniMed and Newstrike bring complementary growing facilities, geographic locations, high functioning teams and brand strategies that lead in the medical and recreational markets.

CanniMed will be more valuable as a company that offers both medical and recreational products. There is significant value in CanniMed's existing business that is not currently recognized by the market. The Newstrike Acquisition will help to unlock that value. Marrying CanniMed's 16 years of pharmaceutical cannabis cultivation experience with zero recalls or product shortages with Newstrike and Up Cannabis' premier recreational brand (in partnership with The Tragically Hip) and expertise in key product trends, creates the opportunity for significant financial returns.

Expanded market opportunity through the creation of a premier global cannabis company. The international medical cannabis market is $70 billion and CanniMed is well positioned to become a leader with an oils facility with a 50 million bottle capacity by the end of all four phases of construction. The Canadian cannabis industry represents a massive more than $8 billion market opportunity for investors and a CanniMed/Newstrike combined company is the best way to participate in it. The increased scale and scope of operations and infrastructure is expected to enhance access to new international markets with potential long-term revenue sources. With the acquisition of Newstrike, CanniMed will acquire additional licenses issued by Health Canada pursuant to the ACMPR, increase its size, and solidify its position as a global leader in the cannabis industry. CanniMed will be well positioned to offer a diversity of products, thereby enabling market segmentation, reducing customer churn, and making the company more competitive domestically and internationally.

Increased cannabis growth capacity and market capitalization. The combined company will boast an increased operational scale with a targeted 45,000 kg of production capacity by 2019, improved capital markets presence with a pro forma capitalization of approximately $700 million (as of December 6, 2017) and is expected to be accretive on key metrics. The combined company will have a broader shareholder base (with current CanniMed Shareholders owning 65.4 per cent of the new company on an undiluted basis), increased market liquidity, and a larger public float than CanniMed currently has.

Expanded product portfolio poised to capitalize on key market trends. The combined company will offer a class-leading portfolio of innovative, high quality products that will be uniquely positioned to address key product trends and emerging drivers of growth in both the medical and adult use recreational cannabis markets.

A management team CanniMed Shareholders can trust. Even if CanniMed shareholders discount the compelling reasons made so far and are considering tendering to Aurora's offer, CanniMed Shareholders should ask themselves: Who do I trust to effectively manage the assets I own? Before answering, CanniMed Shareholders should consider the facts:

Aurora's Management CanniMed's Management
2 product recalls in less than a year No product recalls in 16 years,

since first cannabis production license obtained in 2001

Signature project Aurora Sky is delayed and subject to increasing costs Proven ability to bring new facilities on time and on budget - currently is in the process of building an 8thgeneration facility
Management, including CEO and members of the Board, recently selling off $17 million in shares just before the stock tumbles Brent Zettl, CEO, has increased his significant ownership interest in CanniMed to 9.7 per cent
Aggressive and unfocussed acquisition strategy that poses integration challenges in the fast-paced and constantly evolving cannabis industry Highly strategic, selective, diligenced and thoughtful proposed acquisition of Newstrike provides real opportunity

CanniMed Shareholders should not risk their investment in the cannabis space to a management team they can't depend on.


Aurora is attempting to entice CanniMed Shareholders with phantom value that is based on an inflated and unsustainable share price. Shareholders are urged to consider the facts below and ask themselves - do you want to own the shares of a well-thought-out, operationally-sound company, poised to capitalize on both the medical and recreational market with superior brands - or do you want to be a minority shareholder in an Aurora in an over-hyped and inflated stock?

Aurora is offering phantom value for shareholders' CanniMed Shares, based on an inflated share price. CanniMed Shareholders should be very concerned that 100 per cent of the consideration being offered by Aurora is in the form of Aurora shares - Aurora shares that were worth half as much just two weeks before the Hostile Bid was announced. The premium currently implied by the proposed exchange ratio is inflated and is based on the recent substantial and inexplicable run up in Aurora's share price - 110 per cent (from $3.05 to $6.41) over the two weeks leading up to Aurora's announcement of its intention to launch the Hostile Bid. This significant run up in share price is not based on substantive decisions or value created by Aurora's management.

The premium is inadequate and Aurora knows CanniMed Shares are worth more. Aurora's Executive Vice President, Cam Battley, recently told BNN that, "it makes sense for us to grab assets in Canada... at incredibly attractive valuations and they'll be worth two or three times those valuations in 12 months." This implies an expected minimum value of $30 for CanniMed. Aurora is trying to grab CanniMed Shares without paying fair value for them.

Aurora has capped CanniMed Shareholders' upside but left them with significant downside risk. The potential value offered has been capped at $24.00 (based on a formula related to Aurora's share price and payable in Aurora shares) offering CanniMed Shareholders no exposure to market upside nor additional value created by CanniMed or the industry prior to close. CanniMed Shareholders have no downside protection at a time when Aurora has significant cost overruns and delays at Aurora Sky, as well as numerous operational issues, including two product recalls. It is extremely telling that the shareholders who have entered into off-market lock-up agreements have included downside protection on the share price of CanniMed Shares at $16.00 and $18.00 (based on certain conditions), but no protection is offered to other CanniMed shareholders.

The Hostile Bid is tilted in favour of Aurora's shareholders. First, the Hostile Bid only gives CanniMed Shareholders a maximum of 15.3 per cent of the combined company (based on Aurora's current 20-day VWAP share price), even though CanniMed currently has greater production capacity, a similar number of patients, and an established and successful track record of quality in a strictly government regulated environment.

Second, if Aurora's share price continues to trade above $5.30, the consideration available to CanniMed Shareholders does not increase - but their ownership in the combined company is reduced. For example, if Aurora's share price of $7.00 (as of December 6, 2017) persists, CanniMed Shareholders would only receive 3.4 Aurora shares for every CanniMed share (not the 4.5 Aurora shares that Aurora continues to highlight in their press releases) or only approximately 14.3 per cent of the combined company. CanniMed has a great story - which is why Aurora wants it - so why would CanniMed Shareholders limit their ability to participate in that upside?

Aurora's management wants you to tender to the Hostile Bid at the same time they are actively selling a significant number of their Aurora shares. As Aurora's management is extolling the virtues of Aurora and trying to convince you to tender to the Hostile Bid for Aurora shares, the CEO and other directors and senior officers of Aurora are selling significant numbers of their own Aurora shares. This raises serious questions about their belief in their own ability to execute the business plan they are selling to the market. For example, on November 28, 2017 alone, and just one day before Aurora's share price fell 14 per cent, four Aurora insiders, including its CEO, sold over $17.8 million in Aurora Shares. Collectively, Aurora's management and directors have sold a total of over $42.9 million worth of Aurora shares this year. This kind of selling is very unusual. The most logical inference from this is that Aurora's management believes Aurora cannot and will not remain at its current valuation.

Coercive and misleading Hostile Bid structure. By requiring major shareholders of CanniMed to block the Newstrike Acquisition and entering into lock-up agreements, Aurora is attempting to handcuff CanniMed's Board of Directors' ability to improve shareholder value and railroad shareholders into tendering to an offer that is not in their best interests. Aurora has further misled CanniMed Shareholders by stating that the lock up agreements are "irrevocable", which is not the case as they have many termination avenues including downside protection for the locked-up shareholders.

By way of a highly coercive and unusual condition, the lock-ups signed do not allow the shareholders who have entered into them to tender to a superior offer. With 36 per cent of the vote secured through lock-ups, the possibility of a superior offer emerging is reduced. In fact, Aurora touts the fact that it has blocked CanniMed Shareholders' ability to see increased value by blatantly stating in its circular that it doubts CanniMed will be able to come up with a superior transaction.


The CanniMed Board and management will vote their GREEN proxies in support of the Newstrike Acquisition and will not tender to Aurora's bid. The Board strongly recommends shareholders join them in doing the same, no matter how many shares are owned. Here's how:

  1. To vote FOR the Newstrike Acquisition vote GREEN. Follow the instructions on the GREEN VIF or form of proxy by January 19th, 2018 at 10:00 am (EST). Shareholders with questions or need help voting should call Kingsdale Advisors toll-free at 1-888-518-1554 or by email at
  2. To reject Aurora's bid, simply do nothing. Do not tender your shares. If you have tendered your shares in error or now wish to withdraw, simply ask your broker or Kingsdale Advisors at 1-888-518-1554 or to assist with this process.

Shareholders are also encouraged to visit for more details.

This article was written by Mark Maulden for on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit

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