Aurora Cannabis (NASDAQ:ACB) stock is climbing after the firm announced that it had agreed to buy a peer, TerraFarma, for at least $38 million. In pre-market trading, ACB stock was up more than 7%.
So why are investors reacting positively to the news? Well, TerraFarma owns Canada-based Thrive Cannabis.
According to Aurora, “Thrive is a licensed producer of super-premium cannabis concentrates and craft dried flower, and leverages innovative cultivation and extraction techniques with a singular focus on achieving the highest quality standards.” Its flagship brand, Greybeard Cannabis, has won several awards.
What Happened With ACB Stock
Over the last year, the market share of both Greybeard and Thrive’s other main brand, Being Cannabis, have quickly risen, Aurora stated. Using “sublingual THC and CBD strips,” Being Cannabis “is a wellness-oriented brand,” Aurora explained.
After the deal closes, Thrive will manage Aurora’s recreational cannabis offerings, helping ACB sell more premium products. Thrive’s management has a great deal of experience in growing cannabis and creating cannabis products, Aurora reported.
Aurora expects TerraFarma to boost its EBITDA, excluding certain items, immediately. Aurora noted that it intends to generate positive, adjusted EBITDA overall in the first half of its fiscal 2023.
In addition to the $38 million of cash and ACB stock, Thrive can obtain other cash or stock considerations if it meets “certain revenue targets within two years” of the deal’s closing.
Investors should note that Aurora Cannabis is down 30% for the year to date. Bulls may be hoping that Thrive Cannabis can help ACB on its path to turn things around.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.