Aurora Cannabis Inc. announced its takeover of ICC Labs Inc. in order to expand into South America. ICC Labs operates in Uruguay and is considered a leader in the region’s cannabis market.
ICC, which is based in Vancouver, Canada, reportedly has a 70% market share in Uruguay and carries medical cannabis production licenses in Colombia.
According to Aurora, it acquired ICC Labs for around C$295 million or C$1.95 per share
Cannabis in Uruguay
Uruguay is the only country in South America that has fully legalized cannabis. In fact, with then-President Jose Mujica signing the legislation to legalize recreational cannabis in 2013, Uruguay became the first country in modern times to legalize the drug for both medical and recreational purposes.
In 2014, the country allowed residents to grow up to six cannabis plants at home. It also legalized the formation of growing clubs, as well as the creation of a cannabis regulatory institute and a state-controlled cannabis dispensary regime.
It took a while before Uruguay implemented the retail component of its cannabis law, but in 2017, there were 16 pharmacies authorized to sell cannabis.
Uruguay is also the only country that has set regulations permitting the cultivation of hemp rich in cannabidiol (CBD) on a commercial scale.
Why Aurora thinks ICC is an ideal partner
Aurora said that ICC is an “ideal partner” for them to establish leadership in the South American marijuana market, delivering a clear first mover advantage in the region, which has a population of more than 420 million.
ICC is a fully licensed producer and distributor of recreational cannabis, industrial hemp products, and medical cannabinoid extracts in Uruguay. It is also a fully licensed medical cannabis producer in Colombia, where cannabis is illegal for commercial sale and public consumption but legal for certain medical uses and personal consumption and cultivation are decriminalized.
The company has active operations in Uruguay. It is focused on becoming the leading producer of cannabinoids extracts worldwide. It also gives support and promotes responsible use of the drug for medical purposes.
ICC’s current and under-construction state-of-the-art facilities are expected to bring its production capacity to about 450,000 kilograms (992,080 pounds) of cannabis products per year.
Aurora also noted ICC’s recent launching of its BIDIOL brand of CBD products as another reason why it believes the deal has a strong foundation for capitalization. Not to mention the fact that ICC is developing a broad global distribution network, including a presales deal to export to Mexico, whose market has more than 125 million people.
Aurora’s buying spree
Aurora’s acquisition of ICC is only the latest in the Canadian cannabis company’s buying spree, which has already seen it taking over at least 10 companies in the past couple of years. Aurora’s shares gained 4.1% after news of the deal broke, while ICC added 5.6%.
The purchase price of C$1.95 per ICC share represents a 34% premium to ICC’s 20-day volume-weighted average trading price as of August 22. This was the day prior to ICC’s admission that it was aware of a Spanish-language media news report regarding a potential acquisition.
Aurora is going to issue about 36 million shares in connection with the deal.
Under the terms of the acquisition deal, each ICC shareholder will receive C$1.95 per share, which is payable in Aurora shares that are valued at the volume-weighted average trading price on TSX during the 20 trading day period ending the second to the last trading day on the TSX right before the date the transation is completed. This means an equivalent of 0.2448 Aurora share for each ICC share.
The transaction is subject to the Supreme Court of British Columbia’s approval, as well as the approval of two-thirds of the overall votes cast by ICC shareholders.