Aurora’s first entry south of the border will cost $40 million in Reliva stock, plus up to $45 million over the next two years contingent upon Reliva hitting certain financial targets.
The company said the transaction will create a large and diversified pure-play international cannabinoid company. The transaction represents the culmination of a multi-month strategic evaluation of the US hemp-derived CBD industry.
Aurora said Reliva stood out among a long list of potential partners for its focus on regulatory, testing and compliance protocols; extensive experience selling and marketing regulated consumer packaged goods; deep relationships with critical trade partners that provide a US national distribution footprint; and a track record of growth and profitability.
Aurora said the acquisition will provide several strategic and financial benefits, including a US management team that has strong international CPG backgrounds and a leading market position in hemp-derived CBD in the US.
“Together, Aurora and Reliva will partner to create an international cannabinoid leader that we believe can deliver robust revenue and profitable growth,” said Michael Singer, executive chairman and interim CEO of Aurora. “We have taken the time necessary to carefully assess the Company’s entry into the US market and we firmly believe that the combination with Reliva will create significant long-term value as Reliva provides us options to grow in hemp-derived CBD internationally.”
Timing
Aurora's first foray into the US comes during a time when the industry faces regulatory uncertainty. The 2018 Farm Bill legalized hemp, but left out CBD. With CBD regulation left in the hands of the Food and Drug Administration, the industry is left in a standstill until the agency offers more clarity.
Several CBD companies are also reporting losses. Charlotte’s Web, the Denver-based CBD manufacturer, recently released its Q1 earnings for 2020, revealing a loss of $11 million compared to a profit of $2.3 million the first quarter of 2019.
CV Sciences also reported a loss. Its earnings for the first quarter of this year saw revenue of $8.3 million, a YoY decline of 45% and a QoQ decline of 11%. During the quarter's earnings call the company blamed the fall on higher levels of competition.
Aurora’s acquisition of Reliva is expected to close in June.