VIDEO: Aurora Cannabis EVP Cam Battley on Why CanniMed Shareholders should Tender Their Shares
TRANSCRIPT: James West: Cam, thanks for joining me today.
Cam Battley: It’s a pleasure.
James West: Cam, let’s start with an overview: what is your role at Aurora Cannabis?
Cam Battley: So, I’m the Executive Vice-President, and I’m the primary external-facing executive of the company. So I work with the industry, with other companies and organizations within the industry, with investors and media, and so on.
James West: Sure. Let’s talk about your own personal 800-lb gorilla in the space.
Cam Battley: Is there an 800-pound gorilla?
James West: There is! Aurora has initiated a takeover of CanniMed.
Cam Battley: I heard that.
James West: CanniMed does not seem to want to play ball. I’ve seen press releases from both companies expressing why one should prevail over the other. Let me ask you: why should investors in CanniMed tender their shares to the Aurora offer?
Cam Battley: You know, the best way to answer that question is by the investors who have already come to us. So 38 percent of the investors in CanniMed approached Aurora – they came to us. And the reason why they did so was, they were frustrated with the performance of the company, with the execution, or lack thereof. And they had vetted and modeled every other LP in the sector, and they chose us as the best choice.
So they approached us and they said look, we’d be great together; will you think it over? We said yes, after thinking it over very quickly, but in depth – and this does make sense. So it’s a great combination, Aurora plus CanniMed. We’d have over 40,000 patients, we’d have revenues second only to Canopy, and also, the approach to production makes sense. We are a high-tech, purpose-built philosophy company, and that’s the same cultivation approach that CanniMed has taken.
So what we would do, by taking over CanniMed, is we would make their assets sing. We do what CanniMed management has, thus far, not been able to do. I think the frustration of CanniMed shareholders to this point has been, CanniMed is the oldest licensed producer; they’ve been operating for 16 years. With that enormous lead, they’ve gone from first to about tenth in the sector, and that lack of execution is probably what drove the CanniMed shareholders our way. That’s what we can fix; that’s what we’re known for – management and execution.
James West: Okay. So let me challenge you on a couple of items that CanniMed has put forth as to reasons why investors should not tender their shares to your offer. And I mean, the one that first comes to my mind is the fact that Brent Zettl, the founder of the company, who’s been in this game longer than anyone by far, without him, would you be able to run the assets of CanniMed?
Cam Battley: Oh, yes. That’s exactly what we’re proposing to do: take those assets and take CanniMed to a new level. Basically, what we have is the management skills and competence to be able to take CanniMed to the promised land, as part of Aurora. And we’ve been very, very clear that our plan with Aurora, our strategy, is to build a fully integrated, globally dominant cannabis company. That’s what we’re going to do, and we’d like to make CanniMed, and CanniMed shareholders, part of that story.
James West: Okay. So do you think that any of the items in the press release from New Strike, for example, reiterating what it perceives as the benefits –
Cam Battley: Please throw those at me.
James West: Okay! Well, I guess, you know, they put forth their relationship with The Tragically Hip first and foremost –
Cam Battley: Let’s start with that, and then we’ll come to the others.
James West: Okay.
Cam Battley: What I want to know is, is exactly what they’re proposing that The Hip will do, because according to the enabling legislation around cannabis legalization, C-45, you can’t use celebrities to promote your brand. So when I hear them talk about the iconic band, nobody’s a bigger fan of The Hip than I am –
James West: Oh, is that right?
Cam Battley: Huge fan. But what I want to know is, what they are suggesting that The Hip can do for them, and what that association with The Hip, they’re apparently 6 percent shareholders of New Strike, how that translates into being this recreational cannabis marketing powerhouse that CanniMed is calling them; I don’t see it.
James West: Right, okay. Now, the, I guess the only other sort of compelling proposition is that they propose that Aurora shares are over-valued and therefore not as valuable as proposed by Aurora in the takeover context. How do you respond to that?
Cam Battley: Well, they said that when we were valued at what price? And since then, we’ve continued to appreciate. Look, the market has delivered its verdict on our shares and on the valuation of our company. You know, what we’ve seen over the past several months is an increase in share price at Aurora; I think the reason behind that is that we are, by God, performing. We’re executing. If you take a look at our last quarter, which came out three weeks ago, unlike some other companies in the sector who had flat earnings, we had 39 percent quarter-over-quarter growth, and we are just picking up speed now.
We have our production coming online from our most newly licensed facility in Montreal; we call it Aurora V. Production will be coming out of there, with the first harvest, by the end of January 2018. By the end of the second calendar quarter of 2018, we should have production coming out of Aurora Sky – this, of course, is our 800,000 square foot production facility at Edmonton International Airport.
So the vector is up for us. It’s not down, and I would say that if that’s the best argument that CanniMed management can come up with, they don’t have a lot to stand on.
James West: Okay. Now, CanniMed hasn’t responded publicly or directly to you.
Cam Battley: They have not, no.
James West: I saw it in the press the other day that they refused to pick up the phone. Why would that be?
Cam Battley: Well, you know, you’d have to ask them, if you can get them to pick up the phone.
James West: Okay, I see.
Cam Battley: Look, speculation? They had a strategy. They were trying to execute on it. Perhaps they’re frustrated; perhaps they would like another chance. I think that their shareholders are going to deliver the verdict on this, and that is, you don’t get another chance. You had 16 years. You had the opportunity. You were the undisputed monopoly market leader, and you weren’t able to leverage that into a leading position in the sector; it’s time for new blood. It’s time for new management. Let’s take those assets that we do like – the capsules, the drug delivery technologies that CanniMed has – we can make them sing. Let us do it.
James West: Okay. That sounds great. Let’s leave it there for now… and when do we find out what the verdict is?
Cam Battley: Well, it could be up to 105 days, so this is going to be a protracted process, but we’re committed, and we’re going to see the thing through. We are confident that we’ll get there. We’re already hearing positive feedback and a lot of satisfaction from CanniMed shareholders that we’ve stepped to the fore. I think the perception of Aurora also is that we do well by our partners. We’ve made it a purposeful strategy to be the partner of choice in this sector, and you’re seeing it happen with companies like Hempco, with Radiant, with Namaste, which is the vaporizer company with which we had the strategic partnership, with Cann Group in Australia…we were the cornerstone investor in Cann Group, which is the first licensed producer in Australia, with a 20 percent stake in that company. We got in at $0.30 and now they’re trading at over $.250 on the Australian Stock Exchange.
So we’ve demonstrated that we are the partners of choice, and we plan to be exactly that for CanniMed and for its shareholders.
James West: Okay. Well, thanks for the update, Cam.
Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.
Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.
Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.