CanniMed Therapeutics: Acquiror or Target?

On November 14, 2017, Aurora Cannabis Inc. (Aurora) made a proposal to CanniMed Therapeutics Inc. (CanniMed) to acquire all of CanniMed’s issued and outstanding common shares in a share exchange that valued CanniMed’s common shares at a premium of almost 30 per cent over the previous day’s share price. In its proposal, Aurora requested a response from CanniMed’s board of directors by November 17, 2018, in the absence of which it intended to launch a formal, hostile takeover bid. Instead of responding to Aurora’s offer, CanniMed’s board of directors issued a news release advising shareholders to take no action regarding Aurora’s bid and announcing that CanniMed had entered into an agreement to wholly acquire Newstrike Resources Inc. (Newstrike). As a result, Aurora took its bid directly to CanniMed shareholders, with a condition that CanniMed terminate the proposed Newstrike acquisition. Now CanniMed investors had to carefully consider their alternatives: should they tender their shares to Aurora’s bid, or should they hold on to their shares according to the CanniMed board’s recommendation and then decide whether to vote in favour of the Newstrike transaction?

This case can be used in undergraduate- and graduate-level courses on investment banking, valuation, emerging industries, or advanced corporate finance.The case addresses many of the challenges faced by firms in rapidly growing industries. Although a primary focus of the case is on the valuation of young, rapidly growing companies, the case can also be used to discuss the structuring of deals (e.g., using shares as acquisition currency) and to discuss issues such as the role of regulation, hostile bids, and proxy battles. After working through the case and the assigned questions, the students will be able to do the following:<ul><li>Explain the debate over the use of different valuation methods for difficult-to-value companies.</li><li>Apply valuation techniques such as fundamental valuation methodologies, relative valuation methodologies, multiples, last-12-months revenue multiples, and comparable transaction methodologies using the same multiples.</li><li>Understand novel approaches to valuing cannabis companies and other difficult-to-value companies.</li></ul>

• valuation
• mergers and acquisitions
• valuing emerging industries
• hostile takeover