Aurora/ CanniMed -- summary under Unsolicited Bids (corporate)
Overview
The Aurora share-for-share offer for CanniMed (another TSX-listed cannabis company, 38% of whose shares have been locked up) is capped at a value per CanniMed share of $24.00, so that if there is appreciation in the Aurora shares above this cap, the exchange ratio will be reduced accordingly. This does not affect the availability of the s. 85.1 rollover.
Aurora
Aurora’s common shares (the “Shares”) are listed on the TSX and OTCZX. Its principal market is patients who use medical cannabis in Canada.
CanniMed
CanniMed is a Canadian TSX-listed based plant biotechnology company. Since 1988, when its subsidiary PPS was incorporated, the Offeror has been involved in plant biotechnology research, product development and production of plant based materials for biopharmaceutical, agricultural and environmental market applications. CanniMed has produced medical marijuana since 2000.
Exchange terms
Pursuant to the Offer of Aurora, a holder of CanniMed Shares will receive, for each CanniMed Share, 4.52586207 common shares of the Offeror (the "Aurora Shares"), subject to a maximum of $24.00 (the "Cap Price") in Aurora Shares. If, on the earlier of the Offer expiry time and the date on which all conditions of the Offer have been satisfied, the 20-day volume weighted average price of the Aurora Shares ("Calculation Date VWAP") traded on the TSX is greater than $5.30 per Aurora Share, the number of Aurora Shares that a holder of CanniMed Shares will receive for each CanniMed Share will be calculated by dividing the Cap Price of $24.00 by the Calculation Date VWAP.
CanniMed’s Newstrike Resources bid
On November 14, Aurora issued a press release acknowledging that it had delivered a proposal to CanniMed for a business combination. On November 17, 2017, the date Aurora's proposal expired, CanniMed announced that it had entered into a definitive agreement to acquire Newstrike Resources Ltd. Aurora’s Offer is subject to the condition that the proposed acquisition of Newstrike Resources shall not have proceeded, and any acquisition agreement for such acquisition shall have been terminated.
Lock-up
Aurora has entered into Lock-up Agreements with CanniMed Shareholders holding 38% of the currently outstanding CanniMed Shares.
Canadian tax consequences
A Resident Holder who exchanges CanniMed Shares for Aurora Shares in a Direct Exchange will, in general terms, be deemed to have disposed of such CanniMed Shares under a tax-deferred share-for-share exchange pursuant to s. 85.1 unless such Resident Holder chooses to recognize a capital gain (or capital loss) on the exchange.
U.S. tax consequences
The determination of whether the Offer will qualify as a tax-deferred "reorganization" within the meaning of s. 368(a) of the Code (a "Reorganization") depends on the resolution of complex issues and facts, some of which will not be known until the closing of the Offer and any Compulsory Acquisition or Subsequent Acquisition Transaction, and as a result, it is uncertain as to whether the Offer will qualify as a Reorganization or a fully taxable transaction. Subject to the passive foreign investment company rules, a U.S. Holdco who holds CanniMed Shares as a capital asset will not recognize gain or loss on the exchange of its CanniMed Shares for Aurora Shares pursuant to the Offer if the exchange constitutes a Reorganization.