Aurora Cannabis Inc. (ACB.TO) has appointed a new strategic advisor with ties to well-known consumer brands including The Procter & Gamble Company (PG), the Snapple Beverage Corporation, Heinz, and many others.
The Edmonton-based cannabis producer announced the strategic collaboration with Nelson Peltz, currently the chief executive officer and founding partner of the investment firm Trian Fund Management in a news release on Wednesday.
The move could signal Aurora’s foray into mainstream consumer packaged goods. Trian Fund Management owns Wendy’s and Snapple. Peltz’s role will involve the exploration of potential partnerships and advisory on global expansion.
New York listed Aurora shares (ACB) climbed 11.18 per cent to $8.84 at 8:30 a.m. ET on Wednesday.
“Nelson is a very wise guy,” Aurora’s chief corporate officer Cam Battley told Yahoo Finance Canada in an interview. “What we are looking for with Nelson is his wisdom, his experience, his strategic insights and his global network.”
Peltz is currently the non-executive chairman of the fast food chain Wendy’s, and sits on the boards of Procter & Gamble, the food service company Sysco, and Madison Square Garden.
“Nelson is a globally recognized business visionary with a strong track record of constructive engagement to generate accelerated, profitable growth and shareholder value across many industry verticals that are of great interest to us,” Aurora CEO Terry Booth said in the news release.
Peltz, who is worth US$1.6 billion according to Forbes, is also chairman and chief executive officer of Triangle Industries Inc., the largest packaging company in the world when it was acquired by Pechiney S.A.
Battley said Peltz’s partnership with Aurora came together over several months of talks, including face-to-face meetings in New York. He said Peltz is among many large investors being lured to the cannabis sector, based in part on rising institution ownership.
Many observers view Wednesday’s announcement as a signal that a deal between Aurora and one of the iconic American brands associated with Peltz is on the horizon. Battley said while, “there is going to be lots more to talk about in 2019,” Peltz has advised Aurora to take its time, and not lock into a single vertical or partnership.
Trian, the multi-billion dollar New York-based investment firm founded by Peltz in 2005, is known for its shareholder activism.
Aurora has granted Peltz options to purchase 19,961,754 common shares at a price of $10.34 per share, which could make him the second-largest shareholder in the cannabis producer. The options will vest over four years, with potential acceleration based on events including transactions.
“We think that provides clear incentives to him, and an ability to participate in a big way,” said Battley.
Trian lists Mondelez International, Inc., Domino’s Pizza, Inc. (DPZ), Danone SA (BN.PA) and PepsiCo, Inc. (PEP), as well as several other high-profile names in its portfolio.
Battley said Aurora offers the ability to refresh the legacy offerings of consumer packaged firms, some of which have struggled to cultivate loyalty with young and increasingly health consumers.
“I believe Aurora has a solid execution track record, is strongly differentiated from its peers, has achieved integration throughout the value chain and is poised to go to the next level across a range of industry verticals,” Peltz added in the new release.
“I also believe that Canadian licensed producers, and Aurora in particular, are well positioned to lead in the development of the international cannabis industry as regulations evolve, with a strong, globally replicable operating model.
“I look forward to working with Terry and the extended Aurora team to evaluate its many operational and strategic opportunities, including potential engagement with mature players in consumer and other market segments.”
Greg Taylor, chief investment officer at Purpose Investments, said engaging with Peltz suggests a consumer products or beverage deal could be in the works at Aurora.
“It’s really good news. Aurora has struggled for a while to get a partnership in a consumer products company. You keep hearing rumours that they were close on some other deals,” he told Yahoo Finance Canada on Wednesday. “I think a beverage-type deal would be the best outcome. I think this should make it more likely.”
Last September, BNN Bloomberg reported that Aurora engaged in “serious talks” with the Coca-Cola Co. (KO), citing multiples sources familiar with the matter.
Aurora’s chief rivals have been busy striking deals with major U.S. brands, including Canopy Growth Corp.’s (WEED.TO) $5 billion investment from beverage giant Constellation Brands (STZ) and Cronos Group Inc.’s (CRON.TO) deal with tobacco producer Altria Group Inc. (MO).
Taylor credits Aurora for adding expertise from outside the company to “get them to the next level.”
“Peltz has had a great history in consumer products and is a great, known name among the titans of American business,” he said. “This is a win-win for Aurora and for shareholders.”
GMP securities analyst Martin Landry upgraded his rating on Aurora to “buy” from “hold,” and hiked his target price to $15 from $9.50 for Toronto-listed shares. He agrees that Peltz’s presence at Aurora ups the likelihood of new strategic partnerships.
“We believe he could be instrumental in facilitating discussions with large consumer packaged goods companies,” Landry wrote in a research note on Wednesday.
Another very significant step, working together with a titan of global business. 🙂 https://t.co/o6ohqTTsFx
— Cam Battley (@CamBattley) March 13, 2019