Licensed cannabis producing company Aurora Cannabis Inc. (NASDAQ: ACB) recently revealed that it has reached an agreement to acquire fellow cannabis company TerraFarma Inc. for $38 million in a cash and stock deal.
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The deal, which involves Aurora Cannabis acquiring TerraFarma’s popular Thrive Cannabis brand, is likely to close in Aurora’s fourth quarter of Fiscal 2022.
Strategic Impact
With the impending acquisition of Thrive Cannabis, Aurora Cannabis is likely to further solidify its position in the Canadian market and subsequently shift its focus to other premium products like dried flower, pre-rolls, vapor products and concentrates.
Further, the company expects the buyout to be immediately positive to its Adjusted EBITDA and aid the company’s aim to be Adjusted EBITDA positive in the first half of Fiscal 2023.
Management Commentary
The CEO of Aurora Cannabis, Miguel Martin, said, “As consolidation among licensed producers accelerates, it’s vital that any transactions we make, now or in the future, be strategic, accretive, and centred around adding exceptional talent and brands that align with our path to profitability. In these respects, Geoff and the Thrive team have a track record seldom found elsewhere in the Canadian market. They are truly exceptional cultivators who have gained trust with consumers and developed products that have been recognized and acclaimed by Canadian budtenders and industry peers.”
Stock Rating
Consensus among analysts is a Moderate Sell based on five Holds and three Sells. The average Aurora Cannabis price target of $5.21 implies upside potential of 41.6% from current levels. Shares have declined 60.5% over the past year.
Positive Sentiment
TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on ACB, as 7% of portfolios tracked by TipRanks increased their exposure to the stock over the past 30 days.
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