The cannabis industry is heating up again as companies look to consolidate. Curaleaf Holdings Inc. (TSX:CURA), a leading multistate operator in the U.S., has sweetened its offer to buy Canadian-based Aurora Cannabis Inc. (TSX:ACB)(NASDAQ:ACB).
Curaleaf is hoping the higher bid will bring Aurora to the negotiating table. The revised offer values Aurora at US$5 per share, and will be based on a mix of cash and Curaleaf shares. Curaleaf says the increase shows it is serious about negotiating in good faith and reflects the strategic value and long-term potential of bringing the two cannabis companies together.
Aurora has already pushed back on Curaleaf’s earlier hostile takeover attempts. Previously, Curaleaf made an offer that valued Aurora at approximately US$4 per share. Aurora’s board urged shareholders to reject that proposal, saying it significantly undervalued the company’s assets and growth prospects.
Curaleaf values Aurora's growing international business, which it believes can help expand its own growth opportunities. In Aurora's most recent quarter, the company reported a 17% increase in its international medical cannabis business. Over the years, the company has shifted from relying on the Canadian consumer cannabis market to focus more on the international market, where margins can be higher.
While the business remains unprofitable, Aurora is at least showing signs of progress. It incurred a $4 million loss last quarter, which was significantly lower from a year ago, when its loss was nearly $20 million.
Aurora's business is still risky, but Curaleaf clearly sees value. And with Aurora's valuation crashing 94% over the past five years, it has become much cheaper to acquire. Currently, its market cap is around US$290 million.
