Marijuana operator, Aurora Cannabis (NYSE:ACB) has announced that it has signed an agreement for the acquisition of Reliva. Reliva is among the leading retailers of hemp-derived cannabidiol (CBD) products across the US.
Aurora to enter US CBD market through the acquisition of Reliva
CBD is one of the components that can be found in cannabis but unlike tetrahydrocannabinol (THC) found in high levels in marijuana it doesn’t intoxicate. The CBD market is a potential market expected to grow to around $24 billion in the US by 2025. Reliva’s hemp-derived CBD products are currently available in over 20,000 retail locations across the US.
The acquisition agreement will be an all-share transaction deal in which Aurora will give common shares worth around $40 million to Reliva stockholders. Similarly the deal includes a possible earn-out of around $45 million in cash or additional aurora stock or both.
However the additional amount will be paid should Reliva achieve certain financial milestones in the next two years. This is expected to minimize the risk for Aurora shareholders as well as incentivize the management of Reliva to create significant value for the new combined company. The companies will finalize the deal in June subject to shareholder and regulatory approval.
Acquisition to help Aurora in its path to profitability
For Aurora this acquisition will be an opportunity to be accretive on an earnings basis and will help it in its goal of attaining adjusted positive EBITDA by Q1 FY 2021. The company’s interim CEO Michael Singer indicated in a press release that the partnership will help in creating a global cannabinoid leader that will be able to deliver strong growth in terms of revenue and profitability.
Singer added that Aurora had taken time to assess its entry into the fast-growing US market and they are optimistic that the partnership will deliver long-term value. He said that Reliva will offer the company a chance to grow in the hemp-derived CBD segment globally.
