The move is the latest in a series of mergers and acquisitions by Aurora, which now has a production capacity of 570,000 kilograms per year. Cam Battley, Chief Corporate Officer of Aurora Cannabis, spoke to Yahoo Canada Finance about the merger, and outlined why it’s been such a critical part of the company’s strategy.
Yahoo Canada Finance: Why was now the right time to move forward with the MedLeaf merger?
Cam Battley: Because there’s not a moment to be lost. We operate fast anyway. This sector moves fast, Aurora moves faster — we say we operate at the ‘speed of Aurora.’ The validation for that is we’ve done eight acquisitions and eight strategic investments and partnerships in the past just over 12 months.
But there’s not a moment to be lost, because there’s a window of opportunity here for us to establish a global leadership position in inventing the global cannabis industry. We’re already operating in Europe; we have the most significant business presence in Europe with our ownership of a company called Pedanios. Based in Berlin, it’s the largest by volume distributor of medical cannabis in the European Union. Through Pedanios, we’re already selling to the German medical cannabis system and into the Italian medical cannabis system.
In addition, we’re also building two facilities in Denmark, with which to supply Scandanavia and the broader EU market as well. In doing so, we’re not bumping into competitors from the United States. And the reason why is cannabis remains federally illegal in the United States. That means that companies are constrained to a significant degree. Producers can’t produce in one state and sell in the other. They can’t deduct their business expenses. They also can’t list on public exchanges, and therefore achieve access to the kind of capital to rapidly expand and establish a footprint around the world.
So that’s what we’re in the business of doing: we’re inventing the industry not just in Canada but around the world. And we know there’s a window of opportunity that’s open right now, and we don’t know when that window is going to shut. At some point we anticipate the U.S. will change its regulation and make cannabis federally legal, and when that happens, we want to have an insurmountable lead already established.
YCF: How will it improve Aurora’s position in the medical marijuana space?
CB: To begin with, these are companies with a high affinity for each other. We have very similar aligned philosophies of cultivation and production, where both companies are committed to high technology, high quality, high production efficiency and low cost production. We speak the same language, we share the same values, and we actually share the same global vision.
Beyond that, MedReleaf is a very highly respected medical brand, the quality of their product is right at the top of the Canadian sector, as is their production efficiency.
The other thing the two companies share is a commitment to data. More than any other company in the Canadian cannabis sector, Aurora and MedReleaf have invested in and made use of data. From the Aurora side, that’s due to our first acquisition in the summer of 2016, when we acquired CanvasRX, the largest chain of cannabis counseling centres within Canada, with 28 locations across the country. The value of that acquisition, among many other things, has been in giving us excellent real time data on the evolution of the demographics of the Canadian medical cannabis system. CanvasRX, having proved its value that way, and by bringing patients into the Aurora universe, is another one of the tools we’re going to deploy internationally.
Now, that’s one of the synergies between the two companies. Another one is our Pedanios subsidiary in Berlin. That company will allow us to send an ever-increasing volume of Canadian-grown cannabis into the German medical system, where they pay a premium. We’re getting about 50 per cent more for the cannabis we sell in Germany than for that which we sell in Canada due to the currency differences.
YCF: Why has acquisition been so critical to Aurora’s strategy?
CB: You know, from the very beginning, we were committed to growth by both organic means and by M&A.
The organic side of this, you see the nature, and the scale, and the number of our massive production facilities — what we call our Sky-class facilities, named after the first in its class, Aurora Sky, at Edmonton International Airport. That’s an 800,000-square-foot facility capable of producing over 100,000 kilograms of high-quality cannabis per year. It’s something the world’s never seen before, this level of technology and automation. It’s essentially an indoor facility with a glass roof so we can make use of the sun. It features overpressure and automation that have never been used in cannabis before. The technologies have all been validated in the Netherlands, in the production of things like exotic flowers and vegetables, and the efficiency of Dutch hybrid greenhouses of this type is such that the Netherlands is the leading food exporter in the world — it’s quite astonishing, if you think how densely populated that country is and how little land there is.
So we’re growing organically through our facilities including Aurora Sky, Aurora Sun in Medicine Hat, Alta. which is 1.2 million square feet, Aurora Nordic in Denmark, which is 1 million square feet, and the Green Organic Dutchman (TGOD.TO) facility which we’re designing and engineering for them in Valleyfield, Que. They’re a partner of ours and we own 18 per cent of them.
That’s the organic side. But we’ve also been committed to growing extremely rapidly through M&A. And it’s been intelligent M&A. You take a look at the acquisitions that we’ve made, whether it be small ones like B.C. Northern Lights, which produces the most elegant, beautiful, safe grow boxes for home cultivation anywhere in the world, to CanniMed, the previously largest transaction in the cannabis sector, which we just closed last week. These things are all intelligently thought out, they’re done from a strategy, not just from opportunity, and like I said, we feel a degree of urgency. We have a sense of urgency and we operate that way, there’s no time to be lost, we want to establish our presence globally, and become the local domestic supplier. This is why we do it, and this is how we do it.
YCF: Does that sense of urgency come from the upcoming adult recreational market legalization?
CB: No, that would be short-term. It’s helpful, because if you take a look at it, both companies would have done very well on their own, in terms of launching strong, admired brands into the consumer system.
But the real value of this acquisition is long term. You don’t do M&A for short-term opportunities. The real value of this is long term and our ability to, essentially, conquer the world.
Edited for length and clarity.