TORONTO -- CanniMed Therapeutics Inc. is urging its shareholders to reject a hostile takeover bid by competitor Aurora Cannabis Inc., criticizing the value of the proposed deal and its effect on its share price.
In a letter to shareholders released Wednesday, the Saskatoon-based medical marijuana producer said its shares are trading above Aurora's offer of $24 and would likely be higher if it were not for the all-stock hostile bid.
CanniMed said Aurora is offering shares that were worth only half as much just two weeks before its hostile bid was announced last fall and that it is inferior to its own proposed acquisition of Tragically Hip-backed Newstrike Resources Ltd. (TSXV:HIP).
"The combination of CanniMed and Newstrike creates a major player across the Canadian recreational and global medical markets and will be valued as such," CanniMed said in the letter to shareholders.
"We see a clear path to $37 per CanniMed share -- or more."
Aurora formally launched its hostile takeover bid for CanniMed in late November on the condition that CanniMed cancel its own planned acquisition and said its offer will remain on the table until March 9.
Cam Battley, executive vice-president of Aurora, said in an emailed statement that he took issue with what he called "misleading" information attributed to him in the shareholder letter that he said was taken out of context.
He later said in a telephone interview that CanniMed's letter "just reeks of desperation."
Stock commentary website Citron Research said Wednesday that Aurora is "the weakest player in the space," arguing that the company's hostile bid for CanniMed shows that the company irresponsibly allocates capital. Citron said Aurora "is spending $600 million on the deal when the barriers to entry are deteriorating."
Citron also said Aurora's stock should retrace 50 per cent, setting its short-term share target at $6.50.
Battley said Aurora's acquisitions have "benefited both our shareholders and their companies," pointing to its investments in Radient Technologies Inc. (TSXV:RTI), Hempco Food and Fiber (TSXV:HEMP) and Cann Group in Australia.
"Our strategic investments with our partners have increased in value from $40 million to $180 million, or about a 350% growth since we made those investments," he said.
The acrimonious takeover battle between the two marijuana companies was in the regulatory spotlight last month at a joint hearing involving the Saskatchewan and Ontario securities commissions.
The Ontario Securities Commission ruled on Dec. 22 that any securities issued by CanniMed as a defence against a hostile takeover by Aurora will be cease-traded. Aurora, for its part, will be required to amend its takeover bid circular and related press releases to include certain information that could affect CanniMed's shareholders when they decide to accept or reject an offer.
Shares of CanniMed (TSX:CMED) closed 7.25 per cent higher, at $26.13, while Aurora (TSX:ACB) closed up 20.3 per cent, at $14.18 at the end of trading Wednesday.