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Marijuana Munchies: Aurora Gobbles Up Another Rival

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Canadian cannabis company Aurora Cannabis Inc. (ACB.TO) has agreed to acquire smaller rival MedReleaf Corp. (LEAF.TO) in an all-stock deal valued at about C$3.2 billion, the two companies said Monday.

Under the terms of the deal, holders of MedReleaf common shares will receive 3.575 common shares of Aurora for each MedReleaf share held by them. The exchange ratio implies a price of C$29.44 per MedReleaf share.

Following completion of the transaction, existing shareholders of Aurora and MedReleaf will own about 61 percent and 39 percent of the pro forma company, respectively.

The deal has been approved by the boards of directors of both companies, with both recommending that their respective shareholders vote in favor of the transaction.

The transaction will result in the combination of two Canadian cannabis companies with a total funded capacity of over 570,000 kg per year of cannabis, through nine facilities in Canada and two in Denmark.

The combined company will have three established medical brands, Aurora, CanniMed and MedReleaf, coupled with a portfolio of consumer and wellness brands - San Rafael '71, Woodstock, and AltaVie.

Canada legalized medical cannabis in 2013 and has some of the largest cannabis companies in the world. The federal government has announced plans to legalize adult use later this year, which would make Canada the first G7 country to federally legalize adult use.

The transaction will require approval by at least 66.67 percent of the votes cast by the shareholders of MedReleaf present at a special meeting of the shareholders. Holders of about 56 percent of MedReleaf's shares have entered into irrevocable hard lock-ups to vote their shares in favor of the transaction.

The issuance of Aurora shares in connection with the transaction requires the approval of a simple majority of Aurora shareholders present at a special meeting.

The takeover agreement also provides for reciprocal termination fees of C$80 million and reimbursement fee of C$15 million in certain specified circumstances. In the event a superior proposal is presented for either MedReleaf or Aurora, the other company will have five business days to match it.

This is the second acquisition by Aurora Cannabis this year. In January, the company and CanniMed Therapeutics Inc. (CMED.TO) ended a protracted takeover battle with a friendly $1.1 billion merger between the two marijuana giants.

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