Brent Zettl, founder of CanniMed, holds a marijuana plant in one of their research labs in Saskatoon, Sask.Matt Smith/The Globe and Mail
Shareholders of Newstrike Resources Ltd., the cannabis company backed by the Tragically Hip, have voted overwhelmingly in favour of a friendly takeover by CanniMed Therapeutics Inc., moving the contentious deal closer to fruition.
Investors with 99.4 per cent of the stock supported the all-share transaction at a meeting in Toronto. The deal is aimed at giving CanniMed, a Saskatoon-based medical marijuana producer, a platform for entry into the recreational cannabis market. Ottawa is expected to legalize the industry later this year.
Under the arrangement, Newstrike shareholders would get 0.033 of a CanniMed share for each Newstrike share. That puts the current value of the deal at $358-million, based on CanniMed's closing share price of $27.82 on the Toronto Stock Exchange on Wednesday. Early last week, Newstrike's market capitalization surged briefly above $1-billion.
A vote on the deal by CanniMed shareholders, scheduled for Jan. 23, is less certain. To be successful, it requires a majority of CanniMed votes in favour. Investors with 36 per cent of CanniMed shares have committed to a competing, hostile bid for CanniMed from Aurora Cannabis Inc.
"We can't control what else is going to happen. I certainly hope that their shareholders will see the value in what we're doing and I expect they will," Newstrike chief executive officer Jay Wilgar said after the vote.
Aurora's offer is conditional on CanniMed abandoning its takeover of Newstrike, whose nascent consumer brand is known as Up Cannabis. Last week, members of the Tragically Hip, the Canadian Music Hall of Fame rockers who have more than 5 per cent of the company, went public with their support for the deal with CanniMed.
The takeover battle has been front and centre as Canada's weed market, and company valuations, have exploded in recent weeks. Producers are staking out positions as legalization approaches, providing opportunities in what is expected to be a market worth as much as $8-billion.
The scrap got nastier late last week when CanniMed filed a lawsuit against one of its directors and a former board member as well as its largest investors, Aurora and investment dealer Canaccord Genuity Group Inc. for allegedly misusing its confidential information and conspiring to engineer Aurora's hostile takeover of CanniMed. It seeks damages of $725-million.
With a file from Christina Pellegrini.