Aurora acquires MedReleaf for $3.2 billion

Consolidation in Canada’s cannabis sector continues. Two of Canada’s largest medical cannabis producers announced their merger at noon yesterday, with Aurora Cannabis acquiring MedReleaf’s shares for 3.2 billion Canadian dollars.

If the deal is approved by shareholders, the new entity will be valued at over $7 billion, with an annual production capacity of 570 metric tons of cannabis across nine production sites in Canada and two in Denmark, surpassing the size of Canopy Growth, previously Canada’s largest cannabis producer in terms of market value.

Last year, Aurora acquired the Canadian company CanniMed Therapeutics for $1.1 billion, making it the biggest deal in history.

The acquisition of MedReleaf will enable Aurora to reduce costs and consolidate its distribution and production networks.

«This is a transformational transaction that brings together two pioneering cannabis companies, both committed to high-tech, high-quality, low-cost production, to create a powerful, high-growth platform and a global success,» said Terry Booth, CEO of Aurora.

MedRelead is also pleased with this merger. «By joining Aurora, an integrated manufacturer with extensive experience in execution and deep national and international distribution capabilities, we will be ideally positioned to set the standards for our industry at a pace that will be hard to keep up with.»

It will indeed become difficult for small producers to compete with the dominance of large producers, who will capture the majority of the market. Small producers will need to quickly find a way to differentiate themselves in order to survive, much like small craft breweries do when competing against large alcohol conglomerates, for example.

This type of cannabis-related mergers and acquisitions in Canada is just getting started and will go anyway as it speeds up.