Investors have been impatient for Aurora to find its way into the U.S. market.
Photograph by Matteo Paganelli
Before deep losses unseated Aurora Cannabis from the head of Canada’s pot pack, investors were impatient for the company to find its way into the U.S. market. Now the company has found a thrifty entry ticket.
Wednesday evening, Aurora announced a deal to acquire Reliva, an American producer of lotions and nutritional supplements that contain CBD—a soothing, but nonintoxicating ingredient derived from hemp, a variety of cannabis that the U.S. Congress legalized in 2018.
“We have taken the time necessary to carefully assess the Company’s entry into the U.S. market and we firmly believe that the combination with Reliva will create significant long-term value,” Michael Singer, Aurora’s chairman and interim chief executive, said in the announcement.
Some investors seem impressed. Aurora stock (ticker: ACB) jumped 29% to $16.44 right after the market opened Thursday, adding $400 million to the company’s market value. The Dow Jones Industrial Average was up 0.1%.
That is a generous assessment of the Reliva purchase, for which Aurora agreed to pay $40 million in its own stock. It won’t put out cash unless the Reliva business hits two-year financial milestones that would entitle the sellers to an earn-out of up to $45 million in cash or stock. Reliva had sales of $14 million in the 12 months ended February.
In the announcement, Singer said the deal hews to Aurora’s newfound fiscal discipline by conserving cash. Aurora said the cash-flow positive Reliva will immediately help its Canadian acquirer toward its goal of becoming cash flow positive itself. Aurora founder Terry Booth resigned last year amid a flood of red ink.
Reliva sells gummy, tincture and rub-on versions of its CBD products through convenience stores. Derived from hemp, its CBD is federally legal and therefore won’t endanger Aurora’s listing on the NYSE big board. Sales of the product category haven’t lived up to early expectations.
Write to Bill Alpert at william.alpert@barrons.com
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