Aurora Cannabis to buy Thrive Cannabis

Aurora Cannabis Inc. is bolstering its premium pot strategy by acquiring TerraFarma Inc., the parent company of Thrive Cannabis.

The deal announced Tuesday will see Thrive merge with a subsidiary of Aurora, which will buy back all of TerraFarma’s issued and outstanding shares in exchange for $38 million in cash. face and shares of Aurora.

Thrive will also be eligible for up to $20 million in stock, cash, or both, if revenue goals are met within two years of the transaction.

The deal – nicknamed Project Willow – will give Aurora a double discount on premium and handcrafted products, so it could hit profitability in the first half of fiscal 2023, but executives say of Aurora said the transaction is really about tapping into Thrive’s talented staff.

“Brands are moving too fast. Consumers are moving too fast,” said Miguel Martin.

“The only thing that’s really consistent right now are really nice people, and Thrive has that failing.”

Thrive, based in Simcoe, Ont., is known for its premium handcrafted cannabis products, including concentrates, dried flowers, and sublingual strips sold under the Greybeard Cannabis Co brands. and Being Cannabis.

The company is also Ontario’s first licensed producer to open a farm cannabis store that sells cannabis products on the site where they were produced.

Thrive said it decided to sell after spending nine months learning about Aurora and its vision. Thrive wants to make sure that any deal will not affect the company’s brand and strong relationships with customers.

“We don’t sell out,” said Geoff Hoover, chief executive of Thrive. “This gives us the opportunity to increase brand awareness, bringing new products to market to reach consumers that were previously inaccessible to us.”

Unlike most deals between major licensed producers and craft producers, Hoover’s team will maintain a primary role in Thrive’s operations and he will lead the entertainment business. of Aurora, including the San Rafael, Drift and Whistler Cannabis brands.

Martin added: “There was no form point for San Raf to win when Whistler beat Greybeard, so there wasn’t that kind of inherent tension.

“More things are likely to change on Whistler and San Raf and Aurora Drift than we’ll change on Greybeard and Being.”

High-end brands like Thrive’s Greybeard have become increasingly attractive since recreational flasks were legalized in Canada in 2018, as companies believe the price cuts to better compete with the illicit market law will be profitable.

Instead, their interest in the discount segment led them to operate on low margins, claim persistent losses, and find ways to earn more.

High-end and handcrafted products are seen as a potential solution because of their higher price points and loyal customer base.

A November 4 report from Deloitte Canada, BDSA and Hifyre found that handmade flowers grew sales by 158% last year, despite products costing between 16 and 41 percent more than non-handmade flowers. labour.

Martin turned down premium services because he felt the discount market was “irrational.”

The Thrive deal will further increase his bets on premiums, but also signal the departure of Aurora, which has failed to make as impressive or rich acquisitions during the COVID-19 pandemic as during the COVID-19 pandemic. its rivals.

Aurora has not added to its empire since purchasing Reliva LLC in May 2020, but in the last few years consolidation has taken place in the industry. Competitors Tilray Inc. and Aphria Inc. consolidated, Hexo Corp. acquired Zenabis Global Inc., Redecan and 48North Corp.

Canopy Growth Corp. won the Supreme Cannabis, Ace Valley Cannabis and Wana Brand.

In between those deals, Martin said on an earnings call in May, “We don’t see anything in Canada that we’re supposed to have. Buying or renting market share, I think, right now isn’t right. is a great game in Canada.”

Martin now feels he’s been “beaten a bit” by industry observers for taking that approach, but he says, “I’m in no hurry because I’m looking for something real.” Specifically.”

Something specific is a cannabis company with the usual attractive deals – strong balance sheets, products and brands – but more importantly smart and knowledgeable people.

“I wanted a group of people that I wouldn’t buy their brand for,” says Martin.

“I’m really going to let them join us on this journey and lead this business for us.”

Aurora said the transaction will offer positively adjusted EBITDA immediately and end in the fourth quarter of the company’s fiscal year, but subject to customary closing conditions.

This Canadian Press report was first published on March 22, 2022.

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