Aurora Cannabis Acquires Controlling Interest in Bevo Farms
Long Term Investment Expected to Deliver Aurora Immediate Positive Cash Flow
- Aurora acquires a controlling interest in Bevo; one of the largest suppliers of propagated vegetables and ornamental plants in North America with proven track record of profitability
- Bevo will continue to be run by existing management team; robust growth plan includes use of Aurora Sky for ornamental plant cultivation and for vegetable propagation
- Transaction is expected to be immediately accretive adding ~$9 million of LTM Adjusted EBITDA; Aurora remains on track to achieve consolidated positive Adjusted EBITDA run rate exiting the first half of fiscal 2023.
EDMONTON, AB, Aug. 25, 2022 /PRNewswire/ – Aurora Cannabis Inc. (the “Company” or “Aurora”) (NASDAQ: ACB) (TSX: ACB), the Canadian company defining the future of cannabinoids worldwide, is pleased to announce today that a wholly-owned subsidiary of the Company has acquired a controlling interest in Bevo Agtech Inc. (“Bevo”), the sole parent of Bevo Farms Ltd., one of the largest suppliers of propagated vegetables and ornamental plants in North America (the “Bevo Transaction”). Concurrent with closing of the Bevo Transaction, Bevo entered into an agreement to acquire the Company’s Aurora Sky facility in Edmonton, Alberta through the acquisition of one of Aurora’s wholly-owned subsidiaries (the “Aurora Sky Transaction” and together with the Bevo Transaction, the “Transaction”).
The Transaction allows Aurora to immediately benefit from a profitable, cash flow positive and growing business, and may have the potential to drive long term value to Aurora’s existing cannabis business via the application of Bevo’s industry leading plant propagation expertise. Aurora, through its wholly-owned subsidiary, will acquire 50.1% of Bevo’s outstanding common shares, take a controlling position on Bevo’s board of directors and financially consolidate Bevo. Bevo’s experienced management team are to remain significant shareholders and stay in place to embark on a robust growth plan, including the use of the Aurora Sky facility for orchid cultivation and vegetable propagation.
Founded in 1986, Bevo operates 63 acres of greenhouse in British Columbia, Canada; is led by a management team with over 85 years of agricultural experience, and supplies greenhouses, nurseries, field farms and wholesalers. Bevo has consistently demonstrated growth in revenue and earnings over the past decade through process improvements and facility expansions. For the twelve months ended June 30, 2022, Bevo has achieved revenues of $39 million and Adjusted EBITDA of $9 million (excluding non-recurring rental revenue). Bevo’s business exhibits seasonality driven by agricultural grow cycles, with the strongest financial period being from January to June.
This investment once again demonstrates our disciplined capital allocation approach and is consistent with both our short term needs and long-term vision to be the leading global cannabis company.
Miguel Martin, Chief Executive Officer of Aurora
Bevo’s track record in generating not only positive Adjusted EBITDA but free cash flow, world class propagation expertise, and established distribution networks in Canada and the United States makes them an ideal strategic partner.
“We expect this investment and collaboration between industry leaders will drive significant shareholder value and synergies for both parties. We are also excited about Bevo repurposing Aurora Sky and the potential to expand the scale and scope of their business and saving significant costs previously expected in connection with the wind down and sale of the facility,” continued Martin.
Leo Benne, President & CEO of Bevo, added, “Since inception, Bevo has taken great pride in utilizing state-of-the-art technology to become a leading plant propagator in North America. We are delighted to join forces with Aurora to pursue our high growth strategy, starting with our move into Alberta which allows us to significantly expand Bevo’s addressable market.
We are incredibly happy that the Aurora team is committed to keeping all of our facilities dedicated to our customer base, and to expanding our operations into Alberta through the addition of the Aurora Sky facility.
Leo Benne, President & CEO of Bevo
It is clear that the Aurora team is deeply aligned with our existing business plans and objectives for profitable growth, and we look forward to building upon the strengths of Aurora as a sponsor to accelerate our business.
- Supports Aurora’s timeline to profitability with positive and growing Adjusted EBITDA and free cash flow. The Transaction is aligned with Aurora’s plan to achieve Adjusted EBITDA profitability on a run-rate basis in the first half of fiscal 2023, as Bevo has consistently achieved positive and growing Adjusted EBITDA for over 10 years.
- Bevo’s management team is pursuing a high-growth business plan intended to scale Adjusted EBITDA from current levels, starting with conversion of the Aurora Sky facility for non-cannabis agriculture. Repurposing of the Aurora Sky facility is expected to generate revenue and Adjusted EBITDA with minimal capital investment needed to retrofit the facility, while saving on facility shutdown costs. This is expected to allow Bevo to greatly increase its production capability, extend its shipping range, and access new regional greenhouse demand in Canada and the United States.
- Bevo employs proprietary and innovative processes and greenhouse technology designed to provide industry-leading efficiency. Ability to leverage Bevo’s propagation capabilities is expected to enhance Aurora’s existing genetics licensing business (Occo) to create healthy clones for sale and could potentially lead to large scale cannabis propagation across the industry.
- Bevo’s management team will retain substantial equity ownership and partner with Aurora to drive profitable growth across both businesses. Bevo’s existing management team, who have a proven track record of achieving consistent revenue growth and driving EBITDA improvement through innovative agricultural processes, will remain in place with significant equity ownership.
Aurora is purchasing its controlling interest in Bevo from certain of Bevo’s existing shareholders (the “Bevo Selling Shareholders”). Total cash consideration paid by a subsidiary of Aurora on closing was approximately $45 million. Up to an additional $12 million shall be payable by a subsidiary of Aurora to the Bevo Selling Shareholders over the three years following closing of the Bevo Transaction, conditional on Bevo successfully achieving certain financial milestones at its Site One facility in Langley, which additional amounts may be satisfied, at Aurora’s option, through the issuance of Aurora common shares, subject to approval of the Toronto Stock Exchange.
Up to $25 million could be payable over time by Bevo to Aurora in connection with the Aurora Sky Transaction, based on Bevo successfully achieving certain financial milestones at the Aurora Sky Facility. Closing of the Aurora Sky Transaction is conditional upon receipt of certain third-party consents.
Lazard Canada Inc. acted as exclusive financial advisor and Stikeman Elliott LLP acted as legal counsel to Aurora in connection with the Transaction.
Agentis Capital Advisors acted as exclusive financial advisor and Fasken Martineau DuMoulin LLP acted as legal counsel to Bevo in connection with the Transaction.
About Aurora Cannabis
Aurora is a global leader in the cannabis industry, serving both the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in global cannabis, dedicated to helping people improve their lives. The Company’s adult-use brand portfolio includes Aurora Drift, San Rafael ’71, Daily Special, Whistler, Being and Greybeard, as well as CBD brands, Reliva and KG7. Medical cannabis brands include MedReleaf, CanniMed, Aurora and Whistler Medical Marijuana Co. Driven by science and innovation, and with a focus on high-quality cannabis products, Aurora’s brands continue to break through as industry leaders in the medical, performance, wellness and adult recreational markets wherever they are launched. Learn more at www.auroramj.com and follow us on Twitter and LinkedIn.
Aurora’s common shares trade on the NASDAQ and TSX under the symbol “ACB” and is a constituent of the S&P/TSX Composite Index.
Bevo is North America’s leading supplier of propagated agricultural plants, operating approximately 63 acres of greenhouse facilities on 98 acres of land in Langley, BC, 50 acres of land in Aldergrove, BC, and 20 acres of land in Pitt Meadows, BC. Bevo’s main products are the propagation of vegetable plants such as tomatoes, peppers, cucumbers, and other plants such as bedding plants, flowers and grasses. Bevo markets its products to established greenhouse growers, nurseries and retail outlets throughout North America.
This news release contains reference to certain financial performance measures that are not recognized or defined under IFRS (termed “Non-GAAP Measures”). As a result, this data may not be comparable to data presented by other licensed producers of cannabis and cannabis companies. Non-GAAP Measures in this news release include, but are not limited to, “Adjusted EBITDA”.
Adjusted EBITDA is calculated as net income (loss) excluding interest income (expense), accretion, income taxes, depreciation, amortization, changes in fair value of inventory sold, changes in fair value of biological assets, share-based compensation, acquisition costs, foreign exchange, share of income(losses) from investment in associates, government grant income, fair value gains and losses on financial instruments, gains and losses on deemed disposal, losses on disposal of assets, restructuring charges, onerous contract provisions, out-of-period adjustments, and non-cash impairments of deposits, property, plant and equipment, equity investments, intangibles, goodwill, and other assets. Adjusted EBITDA is intended to provide a proxy for the Company’s operating cash flow and is widely used by industry analysts to compare Aurora to its competitors, and derive expectations of future financial performance for Aurora, and excludes out-of-period adjustments that are not reflective of current operating results. Adjusted EBITDA increases comparability between comparative companies by eliminating variability resulting from differences in capital structures, management decisions related to resource allocation, and the impact of FV adjustments on biological assets and inventory and financial instruments, which may be volatile and fluctuate significantly from period to period.
For an explanation of this measure to related comparable financial information presented in the consolidated financial statements prepared in accordance with IFRS, refer to the Company’s news release of February 10, 2022, a copy of which is available under the Company’s profile on SEDAR at www.sedar.com the discussion below.
Non-GAAP Measures should be considered together with other data prepared in accordance with IFRS to enable investors to evaluate the Company’s operating results, underlying performance and prospects in a manner similar to Aurora’s management. Accordingly, these non-GAAP Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
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