The Edmonton-based cannabis company says it has granted Peltz options to purchase nearly 20 million common shares at $10.34 per share, slightly below Tuesday's closing price.
The shares closed up nearly 13 per cent on the Toronto Stock Exchange to $12.02. The stock had been as high as $12.33 in earlier trading.
Peltz is CEO and founding partner of Trian Fund Management LP, a multi-billion dollar investment management firm. He also serves as the non-executive chairman of The Wendy's Company and director of The Procter & Gamble Company, and was previously a director of H.J. Heinz Company and Mondelez International.
"Nelson is a globally recognized business visionary with a strong track record of constructive engagement to generate accelerated, profitable growth and shareholder value across many industry verticals that are of great interest to us," said Aurora's chief executive Terry Booth in a statement.
Aurora said it will work with Peltz to explore potential partnerships for entry into certain market segments, and he will also advise on the cannabis producer's global expansion strategy.
Peltz said Aurora has a "solid execution track record" and is poised to go to the "next level" across a range of industry verticals.
"I also believe that Canadian licensed producers, and Aurora in particular, are well positioned to lead in the development of the international cannabis industry as regulations evolve, with a strong, globally replicable operating model," Peltz said in a statement.
Bringing in the high-profile adviser increases the likelihood of strategic partnerships for Aurora, said Martin Landry, an analyst with GMP Securities.
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"Trian has been involved with a number of CPG (consumer packaged goods) companies such as PepsiCo, Dr Pepper Snapple, Procter & Gamble, Kraft Foods, Heinz, Mondelez, among others," he said in a note to clients. "We believe he could be instrumental in facilitating discussions with large CPG companies."
The arrangement with Peltz stands in contrast to the approach taken by Aurora's Canadian peers, said Vivien Azer, an analyst with Cowen and Company.
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While Tilray, Canopy Growth, and Cronos have partnered with established Fortune 500 companies — the latter two conceding significant equity stakes as well — Aurora has remained independent and brought in an adviser to guide its next phase of growth, she wrote in a note to clients.
"In light of Peltz's past deals as an activist, we do not view the announcement as a step towards driving change to the existing business model (e.g., not a break up story)," Cowen said. "Rather, Peltz brings a network of relationships with large potential strategic companies that ACB could partner with across medical and consumer applications. In addition, we think ACB will be more patient in partnership selection than its peers, particularly regarding equity investment."
The options granted to Peltz will become effective gradually over a four-year period on a quarterly basis, with accelerated vesting if specified events occur. Those events include the consummation of certain transactions and the closing price of Aurora's common shares being at least $31.02 and additionally $41.36 for a specified number of trading days.
In consideration for services rendered by Mr. Peltz, Aurora has granted 19,961,754 purchase options at a price C$10.34/share. The options will vest ratably over a 4-year period (quarterly), subject to accelerated vesting based on the occurrence of certain specified events. One such event is the closing price of Aurora’s common shares being at least CAD$31.02—and additionally—C$41.36 for a specified number of trading days. Should Nelson Peltz help guide Aurora to such lofty price objectives, both parties in the transaction will be handsomely rewarded.
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Peltz, whose New York-based Trian Fund Management LP has more than US$10 billion under management, will advise Aurora on potential partnerships, the company said in a statement Wednesday. Auroras shares gained 8.5 per cent to $11.54 as of 10:43 a.m. in Toronto.
Nelson comes with a phenomenal track record and was very excited about the growth opportunity here at Aurora, Aurora Chairman Michael Singer said in a phone interview. He isnt as antagonistic as some of the market may portray him to be and he collaborates closely with the companys board and management, and we thought that recipe and his deep connection to global businesses that we think are going to be value-added to our business going forward was the right recipe.
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Peltz, 76, has been granted 20 million options to purchase Aurora shares at $10.34 each, slightly below Tuesdays closing price of $10.64. The options will vest on a quarterly basis over four years, or faster if certain conditions are met, including the consummation of certain defined transactions and the share price hitting $41.36 for a specified number of trading days. If exercised in full, that would make Peltz the second-largest shareholder in Aurora after ETF provider Vanguard Group Inc., according to data compiled by Bloomberg.
While Singer acknowledged that the remuneration is significant, he said its also aligned with shareholder interests. Aurora said in January that it expects to achieve sustained positive earnings before interest, taxes, depreciation and amortization beginning in the second quarter of 2019.
I believe Aurora has a solid execution track record, is strongly differentiated from its peers, has achieved integration throughout the value chain and is poised to go to the next level, Peltz said in the statement. He added that he looks forward to helping Aurora evaluate its many operational and strategic opportunities, including potential engagement with mature players in consumer and other market segments.
GMP Securities analyst Martin Landry raised his rating on the stock to buy from hold, saying Peltz could be instrumental in facilitating discussions with large consumer packaged-goods companies.
Aurora, based in Edmonton, Alberta, hasnt yet secured a major strategic partner along the lines of Constellation Brands Inc.s investment in Canopy Growth Corp. or Altria Group Inc.s deal with Cronos Group Inc. Constellation and Altria have options of taking majority control of their respective Canadian cannabis companies in the future.
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Unlike Canopy and Cronos, Aurora isnt looking for one big partner, Singer said. Instead, it prefers to find multiple partners across various market segments, including packaged goods, beverages, cosmetics, wellness and pharmaceuticals.
While the cannabis industry has attracted plenty of high-profile names — including Martha Stewart, who recently took an advisory role at Canopy, and Kiss singer Gene Simmons, whos chief evangelist officer at Invictus MD Strategies Corp. — Peltz is arguably the highest-profile investor to take a job with a pot firm.
It isnt just about Nelsons Rolodex, its what we believe Nelson will bring to the table and his advice and his thoughtfulness and frankly a lot of the help that we anticipate needing as we start to engage in some of these more significant discussions, Singer said.
Peltz has a long history of agitating for change at consumer companies, including at Wendys Co., where he is chairman. Trian also has pushed for changes at Procter & Gamble Co., where Peltz sits on the board; PepsiCo Inc.; Mondelez International Inc.; and Family Dollar Stores Inc.