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.
Nanaimo, B.C.-based Tilray announced Wednesday it hired former Goldman Sachs managing director Andrew Pucher to lead the companys global corporate development activity, which will include M&A and corporate investments. Pucher previously headed the investment banks Canadian diversified banking division, which included Goldmans coverage of the Canadian cannabis industry. Meanwhile, Lift & Co. appointed a new CFO with Kasia Malz taking over the role from Craig Hudson, who is leaving the company for other endeavours. Also, Toronto-based Khiron Life Sciences appointed Edwin Bendek as the companys new head of its medical skincare division.
Aurora Cannabis taps Wall Street titan Nelson Peltz as adviser, seeking global legitimacy
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.
Aurora shares surge as billionaire Nelson Peltz hired as advisor
"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.
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.
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Bringing in the high-profile adviser increases the likelihood of strategic partnerships for Aurora, said Martin Landry, an analyst with GMP Securities.
"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."
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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.
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.
Firstly, it appears that Trian is not simply some passive fund manager. According to the company’s website, “Trian is a highly engaged shareowner (italics not my own) that combines concentrated public equity ownership with operational expertise.” This is the type of organization that not only takes 9 and 10-digit equity positions, they provide active counsel to help vested companies achieve operational benchmarks and increase ROI. Obviously, Trian doesn’t invest their time and energy in just anyone; investors should assume there’s acute attributes they glean in Aurora Cannabis that makes such an investment worthwhile.
Cannabis maker Aurora picks billionaire investor Peltz as adviser
"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.
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Nelson Peltz founding partner of Trian Fund Management LP. speak at the WSJD Live conference in Laguna Beach, California October 25, 2016. REUTERS/Mike Blake
Billionaire activist investor Nelson Peltz signed on as a strategic adviser to Aurora Cannabis Inc., lending his reputation and name recognition to the Canadian company in exchange for millions of stock options.
Mr. Peltz, who runs the activist investment firm Trian Fund Management LP, will work with Aurora on partnerships and global expansion. In return, Mr. Peltz has been granted options that allow him to purchase almost 20 million Aurora common shares for $10.34 a piece. The options vest over four years, and they expire after seven years.
Aurora Cannabis appoints U.S. billionaire Nelson Peltz as strategic adviser
The move comes as major Canadian cannabis producers scramble to sign export deals and to make international acquisitions. Across the industry, it is generally accepted that the Canadian market is oversaturated, so companies are looking abroad to grow and to live up to their rich valuations. At the same time, domestic producers are looking to sign partnerships with beverage and consumer products giants, to give them more legitimacy on the global stage.
As Aurora expands internationally, with recent transactions in countries such as Portugal and Britain, the company hopes Mr. Peltzs relationships will help to forge new deals – especially as global consumer-products companies grow more comfortable with cannabis. He is a Wall Street giant. He is a dealmaker. He has an enormous network of global contacts,” Aurora chief corporate officer Cam Battley said in an interview.
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 reaching certain levels.
However, two of Mr. Peltzs most recent major bets have failed to deliver. Two years into its investment in Procter & Gamble Co., Trian is still struggling to turn the consumer products giant around. The fund has also taken a bath on its bet on General Electric, after the companys share price collapsed in 2018. By the end of the year, Trian had lost about US$1-billion on the investment.
The Aurora partnership is an unusual one for Mr. Peltz. At Trian, he is best known for an aggressive, activist approach at iconic companies such as DuPont, PepsiCo and Kraft and agitating for shake-ups that include selling off divisions or slashing costs. Aurora, meanwhile, is still in its infancy.
The deal terms are also unique. Instead of buying stock up front, Mr. Peltz is taking stock options, and he hasnt disclosed any interest in a board seat or shakeup. Aurora recently shuffled its directors, moving chair Michael Singer into the role of executive chairman in late February – a position that often provides for day-to-day management of the company. At the same time, Aurora announced that director Diane Jang had voluntarily resigned from the board.
The companys shares climbed 13 per cent after the news on Wednesday, to close at $12.02. We believe [Mr. Peltz] could be instrumental in facilitating discussions with large consumer products companies,” GMP Securities analyst Martin Landry wrote in a research report.
But it is unclear what exactly Mr. Peltz will ultimately do for Aurora. Unlike Canopy Growth Corp., which secured several billion dollars in funding from Constellation Brands to help finance its growth, Aurora at this point seems to benefit the most from the legitimacy Mr. Peltz provides. However, he does not yet have any skin in the game.
Mr. Peltz also wont say whether he plans to use any stock he purchases to make an activist play at Aurora. Mr. Battley said the two parties had been in talks for months and had met several times face-to-face in New York. Asked whether he worries that Mr. Peltz could push for action such as a sale of the company, Mr. Battley dismissed the idea. Thats where were very much aligned, on a long-term opportunity,” he said.
Aurora Cannabis shares jump in premarket after signing up billionaire investor Nelson Peltz as strategic advisor
The deal structure suggests Mr. Peltz views the opportunity in a different light than his usual investments. He is teaming up with Aurora on his own, outside of Trian, and any share purchases will be made with his own money. Mr. Peltz declined to comment for this story.
In a statement, Mr. Peltz said he plans to evaluate Auroras many operational and strategic opportunities, including potential engagement with mature players in consumer and other market segments.
High-profile billionaire Nelson Peltz joins Aurora Cannabis as strategic adviser
If Mr. Peltz ultimately exercises all of his options, he will own 2 per cent of Aurora, based on the current number of shares outstanding. At the moment, the companys largest shareholder is Vanguard, with a 2.04-per-cent stake, according to Refinitiv.