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Over a year after Aurora Cannabis Inc. executives started publicly talking about making a push into the U.S. market, the company has made its move: the $40 million all-stock purchase of a cannabidiol maker called Reliva.
Though Aurora /zigman2/quotes/210559470/composite ACB -2.20% /zigman2/quotes/203734337/delayed CA:ACB -2.25% will issue roughly 2 million shares to make the purchase, shares rose nearly 30% in the extended session Wednesday.
The closely held Reliva LLC makes products that include cannabidiol, or CBD, which is a non-intoxicating element of the marijuana plant. In the announcement, Aurora said Reliva sells products in 20,000 retail locations in the U.S. and has achieved a non-standard measure of profitability. Set to close in June, Aurora could pay up to $45 million in additional stock beyond the $40 million initial payment.
In the announcement, Aurora said that Reliva’s management team will continue to operate the U.S. business, with its chief executive taking the title of president, U.S.
Reliva’s website sells a range of CBD products including drink mix, gummies, lip balm, pet inctures and skin cream.
The U.S. recently legalized hemp, but left regulating CBD to the Food and Drug Administration, which has taken a decidedly cautious approach. At the moment, companies are not allowed to add CBD to food, drinks or cosmetic products, and the FDA has been cracking down on companies that do so.
The FDA’s stance has proven difficult for some of Aurora’s competitors. Cronos Group Inc. /zigman2/quotes/206842762/composite CRON +4.32% said in a recent conference call that it had yanked plans to launch a CBD brand in the U.S., and cited regulatory uncertainty, among other things.
Aurora’s stock has been on a roller-coaster ride in the past year, falling to the point of being threatened with delisting before executing a reverse stock split and seeing the newly bundled shares spike — to twice the market value of rival OrganiGram Holdings Inc.’s /zigman2/quotes/209289540/lastsale OGI +1.50% — after an earnings report that showed better pot sales than expected.
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