Aurora Cannabis makes strategic investment into the world’s largest producers of hemp products
Hempco Food and Fiber Inc. (“Hempco”) (TSXV: HEMP) announced the terms of an agreement with Aurora Cannabis Inc. (Aurora) (TSXV: ACB | OTCQX: ACBFF) for Aurora to make a strategic investment in Hempco for an ownership stake of up to 19.9% on a fully diluted basis, subject to applicable regulatory approvals.
Hempco is one of the world’s largest producers of industrial hemp products, and currently offers three primary product lines: (1) bulk and packaged food products (e.g. hemp protein powder, hemp seed nut/ hearts, and hemp seed oil etc.); (2) hemp fibre; and (3) functional food/nutraceuticals. Hempco’s line of consumer packaged goods (CPG) are sold under the brand “PLANETHEMP,” and Hempco products are distributed in seven countries.
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This marks a significant step in the Canadian medical cannabis industry by showcasing the diversification into hemp-based edibles of Aurora as a producer of medical cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR). Whereas hemp products do not contain the psychoactive THC in medicinal amounts, pundits of the medical cannabis industry predict that edibles will become a significant medical cannabis subsector in Canada.
Aurora’s wholly-owned subsidiary, Aurora Cannabis Enterprises Inc., is a licensed producer of medical cannabis pursuant to Health Canada’s ACMPR. The Company operates a 55,200-square foot, state-of-the-art production facility in Mountain View County, Alberta, and is currently constructing a second 800,000 square foot production facility, known as “Aurora Sky”, at the Edmonton International Airport, and has acquired, and is undertaking completion of, a third 40,000 square foot production facility in Pointe-Claire, Quebec, on Montreal’s West Island. Aurora also recently acquired Pedanios GmbH, a leading wholesale importer, exporter, and distributor of medical cannabis in the European Union (“EU”), based in Berlin, Germany.
At present, there is no indication that the sales of edibles in Canada will be permitted when recreational cannabis is legalized in Canada in July 2018. However, experience in other jurisdictions show that the sales of edibles has significant consumer appeal for both the recreational markets.
Since edibles don’t produce any smoke or smell, they are quickly being adopted by people who prefer discretion. Edibles have enjoyed a 121% increase in sales over the past year in Washington state, according to data from Headset Inc., a cannabis analytics firm. Washington doesn’t allow the sale of gummy products because they are considered to be too similar to children’s candy. However, baked goods like cookies and brownies are allowed along with mints, beverages and savory products like soup. All products have a red hand sticker on them saying it isn’t suitable for children.
Additionally, subject to customary conditions including Hempco shareholder approval and the negotiation and execution of an option agreement, Aurora will be granted an option to acquire certain shares from the majority owners of Hempco, which, upon exercise, would bring Aurora’s total ownership interest in Hempco to 50.1% on a fully diluted basis. If Aurora elects to exercise this Option, the shares will be acquired in tranches, the pricing of which is contingent on certain performance milestones of Hempco.
Pursuant to the agreed upon terms, Aurora has agreed to purchase 10,558,676 units of Hempco at $0.3075 per unit for total gross proceeds of $3.2 million (the “Investment”).
Dr. Luc C. Duchesne is a Speaker and Author with a PhD in Biochemistry. With three decades of scientific and business experience, he has published ... <Read more about Dr. Luc Duchesne>