TORONTO, Jan 22 (Reuters) - Shares of Canadian cannabis companies CanniMed Therapeutics Inc, Aurora Cannabis and Newstrike Resources rose on Monday on expectations that Aurora will buy the two smaller rivals.
Reuters on Friday reported that Aurora was in friendly talks to acquire both CanniMed and Newstrike to create Canada’s biggest marijuana producer.
Buying CanniMed and Newstrike would boost Aurora’s capacity to meet demand at home, as well as overseas, as more countries approve the use of medical marijuana. The deal-making and fundraising frenzy comes as marijuana companies jostle for prime position ahead of the country’s legalization of recreational use of the substance in mid-2018.
Aurora in November made a hostile bid for CanniMed, which itself has been engaged in a friendly takeover of smaller rival Newstrike. After months of fending off Aurora’s advances, CanniMed said last week the two companies were in talks, signaling an easing of tensions between the two.
A standstill agreement between CanniMed and Aurora, earlier set to expire at 11:59 p.m. on Sunday, had been extended to 5 p.m. EST Monday, CanniMed said in a statement on Monday.
A vote by CanniMed shareholders on its acquisition of Newstrike, which was moved to Jan. 25 from Jan. 23, is still set to be held on Thursday, it said.
Newstrike Resources Ltd was up 14 percent at C$1.67 in morning trade. CanniMed hit an all-time high before trading up 6.6 percent at C$37.05 and Aurora gained 5.3 percent to C$14.20.
Aurora originally opposed CanniMed’s acquisition of Newstrike and said its bid would not proceed if the deal went ahead. Newstrike shareholders last week voted overwhelmingly in favor of the combination.
Now, Aurora is discussing buying both companies, with the existing offers likely to be scrapped and replaced with fresh, friendly agreements if the talks are successful, people familiar with the matter told Reuters on Friday. (Reporting By Nichola Saminather; Editing by Steve Orlofsky)