Aurora Cannabis follows up greenhouse designer deal with Quebec producer buyout

Fast-growing Aurora Cannabis Inc. struck twice Thursday, announcing the purchase of greenhouse design firm Larssen Ltd. in the morning and medical marijuana applicant H2 Biopharma Inc. of Lachute, Que., for up to $25 million in stock after markets closed.

The Alberta-based cannabis producer said in the later news release that Larssen’s expertise will “play an instrumental role” in the final design of H2’s 4,300-square-metre cannabis production facility in the Montreal area, which it said is 80 per cent construction complete.

Aurora said it intends to use its ownership of Larssen to pressure other cannabis producers to enter partnerships.

Larssen is involved with more than 15 cannabis industry clients globally, including five Canadian licensed producers, but its Canadian deals will be reassessed once the buyout announced Thursday is completed, it said.

“We’re going to certainly encourage those to proceed but we’re going to require some level of partnership, whether that be an equity stake or a supply agreement or other things,” said Aurora (TSX:ACB) executive vice-president Cam Battley.

“We’re open to various formulae.”

He wouldn’t name the five Canadian companies but said they don’t include CanniMed Therapeutics Inc., against which it is pursuing an all-stock hostile takeover bid, or Newstrike Resources Ltd., a company CanniMed is attempting to buy.

According to its website, cannabis producer The Green Organic Dutchman Holdings Ltd. is working with Larssen to build a large greenhouse in Quebec. It did not return a request for comment Thursday.

Analyst Russell Stanley of Echelon Wealth Partners, who covers CanniMed but not Aurora, said he doesn’t know which Canadian companies Aurora is referring to in its release.

He said it’s highly unusual for the buyer of a service company to so publicly declare that it will revise its deals with competitors.

“I think in the context of also announcing plans to launch a hostile (bid) for CanniMed, clearly Aurora is being very aggressive in its growth strategy,” he said.

He said the rapid rise in share price for Aurora and other cannabis companies means they can afford to make acquisitions very cheaply through stock offers.

“You’re going to see M&A activity pick up, scale is going to become increasingly important,” he said.

Aurora shares gained 32 cents or about five per cent to close at $6.74 on Thursday.

Financial terms of the Larssen deal were not disclosed, but Aurora said they include performance-based milestone payments.

Larssen, which has offices in Denmark and Burlington, Ont., is designing, engineering and overseeing construction of the half-built Aurora Sky cannabis greenhouse near the Edmonton International Airport which will have capacity to produce 100,000 kilograms of cannabis per year.

Battley said the facility will be a closed system hybrid greenhouse capable of precise control of light, heat, humidity and nutrients to produce “ultra low cost” cannabis. To ensure no contaminants enter the system, the air system is designed to be overpressured and overhead robotic cranes will help to replace humans in the growing areas.

Thomas Larssen, principal owner of Larssen Ltd., is to head up a new subsidiary called Aurora Larssen Projects Ltd.

Aurora said Larssen is on pace to generate about $6 million in revenue in the next 12 months.

H2 Biopharma is a late-stage medical marijuana licence applicant, Aurora said. Its facility is to produce up to 4,500 kilograms of cannabis per year and is situated on property that will allow expansion.

Aurora said it will make an initial payment of $10 million in shares, with further payments dependent on completion of the facility, granting of cultivation and sales licences by Health Canada and municipal approval for expansion of the facility.

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