Aurora shares surge as billionaire Nelson Peltz hired as advisor – BNNBloomberg.ca

Aurora shares surge as billionaire Nelson Peltz hired as advisor - BNNBloomberg.ca
Could Aurora Cannabis (TSXACB) (USA) Stock Skyrocket?
Aurora Cannabis shares soared following news that it has appointed U.S. billionaire Nelson Peltz as a strategic adviser and given him the option to buy a stake in the company.

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 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.

Aurora shares surge as billionaire Nelson Peltz hired as advisor

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.

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.

"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.

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.

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.

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.

Peltz said Aurora has a "solid execution track record" and is poised to go to the "next level" across a range of industry verticals.

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"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.

Shares of Aurora Cannabis spiked higher Wednesday after the company announced billionaire investor Nelson Peltz joined the pot producer as an advisor. Peltz, who sits on Procter & Gambles board and is chairman of Wendys Co., will advise Aurora on potential partnerships, the company said in a statement. Peltzs hiring wont come cheap – he was granted 20 million options to purchase Aurora shares at $10.34 each that will vest quarterly over a four-year period. If fully vested, Peltz would become Auroras second-biggest shareholder behind Vanguard Group.

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."

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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.

Aurora Cannabis shares spike after signing up billionaire investor Nelson Peltz as strategic adviser

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.

"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."

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.

Aurora Cannabis taps billionaire investor Nelson Peltz as strategic adviser; shares jump

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.

Either way you slice it, we consider today’s news a transformative event for Aurora Cannabis. Not only are they obtaining strategic guidance from an elite corporate executive, they have an influential voice to help solidify Aurora’s corporate governance policies—thus abetting them with strategic advantage. The connection also opens up the possibility for future Trian Fund Management fund involvement—although that’s only supposition at this point. Taking token positions isn’t part of this firm’s lexicon.

Mar 13, 2019 Aurora shares surge as billionaire Nelson Peltz hired as advisor Kristine Owram, Bloomberg News

“Aurora announced the appointment of Nelson Peltz as strategic advisor to pursue potential partnerships for the company. Nelson Peltz is the CEO and Founding Partner of Trian Fund Management, L.P., a multi-billion dollar investment management firm with a history of activist campaigns. Trian has been involved with a number of CPG companies such as PepsiCo, Dr Pepper Snapple, Procter & Gamble, Kraft Foods, Heinz, Mondelez, among others. We believe he could be instrumental in facilitating discussions with large CPG companies.”

Billionaire investor Nelson Peltz is joining Aurora Cannabis Inc. (ACB.TO, ACB.N) as a strategic advisor and is receiving stock options that could make him the pot firms second-largest shareholder.

“Aurora announced recently that it has started to ship cannabis oils to pharmacies in Germany. With two facilities EU Good Manufacturing Practice certified (Mountain and Markham) and a combined production capacity of 12 tonnes, ACB is well positioned to continue to benefit from high international selling prices. Recently, Aurora also expanded into Portugal with the acquisition of 51% in Gaia Pharm Lda, a license applicant in Portugal.”

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.

In a research update to clients today, Landry upgraded ACB from “Hold” to “Buy” and raised his one-year price target on the stock from $9.50 to $15.00, implying a return of 41 per cent at the time of publication.

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.

Landry thinks ACB will generate EBITDA of negative $99.2-million on revenue of $324.5-million in fiscal 2019. He expects those numbers will improve to EBITDA of positive $99.1-million on a topline of $654.6-million the following year.

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.

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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.

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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.