M&A Updates And New Deals: 2 Cannabis Industry Mergers

by: Special Situation Investor

Linde/Praxair approaching the deadline on the 24th of October.

NY might partially block CVS/Aetna deal.

Two cannabis industry mergers.

Interestingly, Linde (OTCPK:LNAGF) has denied this report, which stated that FTC has given a verbal approval of their deal with Praxair (PX) and “has no such information”. We should hear more news shortly as the deadline is only a few days away (24th of Oct.).

As expected, getting New York regulators' approval will not be a piece of cake for CVS (CVS)/Aetna (AET). Following previously written letter, which described all the concerns with the deal, in the public hearing on the 18th of October, the Department of Financial Services Superintendent Maria Vullo has warned that she can partly block the deal by stopping the merger with Aetna’s New York unit. The main issue is regulators fear of rising insurance premiums, and it appears that several activist parties have also asked NY to block the deal. Mario Vullo has repeatedly demanded for written proof that the companies will deliver the promise to cut the price. However, CVS representative commented that there is no specific plan for that. After getting approval from Connecticut and DOJ, New York is the last hurdle to overcome, and the decision is to be announced after the 25th of October.

Some other deals:

iAnthus (OTCQX:ITHUF) - MPX (OTCQX:MPXEF) Bioceutical All Share Deal

Spread: 14%. Expected closing: H1 2019

A small-cap merger in cannabis industry. iAnthus is acquiring MPX, and the combined company will have licenses in 10 states and is expected to generate $16b sales by 2022. The deal was unanimously approved by the boards of both companies and is subject to two-thirds of MPX shareholder approvals (meeting in January 2019), customary and regulatory approvals. Merger consideration: 0.1673 iAnthus shares, which was 30% premium to pre-announcement last closing price and 14% to all-time high.

Aurora Cannabis (ACBFF) - ICC Labs (OTC:ICCLF) Merger

Spread: 11%. Expected closing: Q4 2018

Another deal in cannabis fields. One of the world's largest cannabis companies Aurora Cannabis is acquiring - ICC Labs. This acquisition will let Aurora get its hands on 70% of the market share in Uruguay (the first country to legalize cannabis) and a license in Columbia. The deal has been unanimously approved by the boards of both companies but is still subject to two thirds of ICC shareholders' approval. A meeting is scheduled on the 6th of November. 28.8% of ICC shareholders have already agreed to vote in favor. Additionally, approvals from British Columbia Court, Uruguayan regulators, and Aurora’s lenders are required. The cannabis industry has recently seen some action (partly due to marijuana legalization in Canada), and Aurora too has been on an aggressive acquisition spree. It has already made 3 acquisitions this year of Anandia Labs ($115m, closed in 2 months), MedReleaf ($2.4B, closed in 2.5 months), CanniMed Therapeutics ($1.1B). Aurora’s management seems to be good at closing deals very fast (even the biggest merger in cannabis industry with MedReleaf), so this ICC Labs deal of $290m should be a duck soup for them. Merger consideration: C$1.95 per ICC Labs share paid in Aurora’s shares valued at 20 day WAP before closing. By the way, from the 23rd of October, Aurora is going to be traded on NYSE under the ticker “ACB”.

Finaccess Capital - Restaurant Brands New Zealand (RBD.NZ) Takeover

Spread: 11%

Fast food franchise operator Restaurant Brands (KFC, Taco Bell, Pizza Hut) has received an indicative non-binding approach from investment company Finaccess Capital. Pricing stands at NZ$9.45 for up to 75% of RBD shares. Finaccess has experience with fast food franchise operators as it has 56% stake in AmRest Holdings SE, which operates mostly the same franchises in Central-Eastern Europe. If the companies proceed to the deal, it would have to be approved by Overseas Investment Office and Yum Brands (the actual owner of the franchised brands).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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