Good morning.
It’s the day after the midterms and the balance of power in Congress has shifted. The Democrats pretty much ran the table.
Now’s a good time as any to become a Cultivated member: We reported aggressively on the dark money group behind the campaign to overturn cannabis sales in Massachusetts, and, if you let us gloat for a second, landed a scoop on Organigram’s bid for Aurora, the largest cannabis deal in recent years.
Let’s get to it.
-JB, JR
Today’s newsletter is 1,043 words or about an 8-minute read.
CULTIVATED CALENDAR
NEXT WEEK November 12 » Pot Policy and Politics → The second installation of the Midwest Cannabis Forum, this time in St. Louis. Tickets available.
December 2 » Cultivated Subscribers’ Breakfast Las Vegas → Open to all subscribers. Secret Las Vegas location.
December 17 » Cultivated Buffalo powered by Jaunty → Our first event in Western New York. Get tickets before we run out!
Visit our revamped Events Page »
What’s the big deal?
M&A
Organigram agrees to buy Aurora
Called it: Organigram on Tuesday said it would buy Aurora Cannabis for C$7.80 per share, topping Curaleaf’s hostile bid. I first reported that Organigram was in talks with Aurora on October 9. Cultivated members got that story first. Just a few weeks later, the bid went live.
What’s in the deal: The deal values Aurora at C$561 million (about $402 million) and represents a 93% premium to Aurora’s August 10 unaffected share price. It’s also a 21% premium to the implied value of Curaleaf’s offer, which is pegged to Curaleaf’s share price as of Monday.
Aurora shareholders will own about 35% of the combined company once the deal closes. It still needs shareholder, court and regulatory approval.
What they’re saying: An Aurora spokesperson told me that Organigram offers the “strongest available outcome,” for Aurora shareholders. CEO Miguel Martin took to social media to urge shareholders to accept the bid.
“The board considered every credible path, including Curaleaf’s offer, other transactions, and remaining independent,” Martin said.
Go deeper: Organigram’s biggest backer, British American Tobacco, is backing the deal. BAT will buy C$187.5 million of new stock to help fund the cash portion. It’s done this before: In February, BAT agreed to put C$65.2 million into Organigram to help pay for German medical cannabis firm Sanity Group, at an average of C$2.72 a share. This time it’s paying C$1.33.
At the heart of the deal is Aurora’s coveted EU-GMP certified cultivation facilities, which give the firm access to the tightly regulated and quickly growing European cannabis market.
In short, it gives Organigram a massive leg-up over its competition to dominate cannabis export markets.
Curaleaf first launched the hostile bid in August at $5 per share and later upsized it to $6. Talks between the two firms broke down in July, as we reported, prompting the hostile offer. The bid devolved into a flurry of press releases and executive sniping from both sides. Curaleaf asked the Alberta Securities Commission to stop Aurora’s at-the-market share sales program. The ASC rebuffed it.
Aurora stock closed up nearly 23%. Organigram fell about 4.7%
On the other hand: Curaleaf held its third-quarter earnings call after the bell on Tuesday. CEO Boris Jordan said that the company’s strategy isn’t dependent on closing the Aurora deal.
“The one thing I can say, though, is that Curaleaf is going to substantially improve our bid substantially,” if they’re able to get diligence access, when asked by an analyst about the dea
He added that in his view, the deal terms are not “accretive” to Organigram.
Curaleaf released a further statement: “Aurora's board granted due diligence access to, in Curaleaf's view, a significantly smaller, underperforming and less liquid company, burdened with a looming share overhang, a history of, and forthcoming, shareholder dilution and weak cash generation, backed by an investor with its own disappointing cannabis investment track record.”
-JB
Midterms
The Democrats took control of both chambers. We’re hopeful the Blue wave helps push some cannabis bills in Congress and in states like Iowa and Wisconsin, which will soon have leaders who support legalization.
Here’s what happened:
Voters soundly rejected Massachusetts Question 8, the Smart Approaches to Marijuana-backed measure that would repeal cannabis sales. The group’s lobbying arm, SAM Action, spent over $3.7 billion supporting the measure. More »
James Talarico won the race for Senate. We reported on how his pro-cannabis stance could help decide the race “on the margins.” But as it turns out, the margins barely mattered: Talarico trounced Ken Paxton. Gina Hinojosa, a Democrat, beat Greg Abbott for the governor’s seat. And Vikki Goodwin appeared to be leading cannabis opponent Dan Patrick for lieutenant governor, but the race was still too close to call around midnight. Check out our interview with Goodwin »
David Crowley, who supported legal cannabis on the campaign trail will be the next governor of Wisconsin. And Rob Sand, the next governor of Iowa, supports taxing and regulating cannabis sales.
We’ll have more breakdowns of what the new political map means for cannabis in the coming days.
Quick hits
Massachusetts advances bill easing medical cannabis access for veterans
The Massachusetts Senate Ways and Means Committee approved a House-passed supplemental budget bill that would let veterans register as medical cannabis patients with VA diagnosis records instead of a doctor’s certification. The bill also adds PTSD, opioid use disorder and chronic pain as qualifying conditions, with a Senate floor vote expected Thursday.
Earnings round up
Curaleaf reported a Q3 net loss from continuing operations of $37.4 million on record revenue of $352.7 million, or $0.14 per share, and reiterated its target of about $150 million in operating cash flow for 2026 despite generating just $22 million in the quarter. $CURLF ( ▲ 10.7% )
Deals, launches, partnerships
CBD American Shaman closes stores ahead of federal hemp ban
Kansas City-based CBD American Shaman is shutting down all of its corporate-owned stores nationwide ahead of the federal hemp THC ban taking effect Dec. 11, citing “persistent regulatory hurdles.” Independently owned franchises are not affected.
