EDMONTON, AB, Aug. 25, 2022 /CNW/ – PRESS RELEASE – Aurora Cannabis Inc., the a Canadian cannabis company, announced today that a wholly-owned subsidiary of the company has acquired a controlling interest in Bevo Agtech Inc. (Bevo), the sole parent of Bevo Farms Ltd., one of the largest suppliers of propagated vegetables and ornamental plants in North America (the Bevo Transaction). Concurrent with closing of the Bevo Transaction, Bevo entered into an agreement to acquire the company’s Aurora Sky facility in Edmonton, Alberta through the acquisition of one of Aurora’s wholly-owned subsidiaries (the Aurora Sky Transaction and together with the Bevo Transaction, the Transaction).
The Transaction allows Aurora to immediately benefit from a profitable, cash flow positive and growing business, and may have the potential to drive long term value to Aurora’s existing cannabis business via the application of Bevo’s industry leading plant propagation expertise. Aurora, through its wholly-owned subsidiary, will acquire 50.1% of Bevo’s outstanding common shares, take a controlling position on Bevo’s board of directors and financially consolidate Bevo. Bevo’s experienced management team are to remain significant shareholders and stay in place to embark on a robust growth plan, including the use of the Aurora Sky facility for orchid cultivation and vegetable propagation.
Founded in 1986, Bevo operates 63 acres of greenhouse in British Columbia, Canada; is led by a management team with over 85 years of agricultural experience, and supplies greenhouses, nurseries, field farms and wholesalers. Bevo has consistently demonstrated growth in revenue and earnings over the past decade through process improvements and facility expansions. For the twelve months ended June 30, 2022, Bevo has achieved revenues of $39 million and Adjusted EBITDA of $9 million (excluding non-recurring rental revenue). Bevo’s business exhibits seasonality driven by agricultural grow cycles, with the strongest financial period being from January to June.
“This investment once again demonstrates our disciplined capital allocation approach and is consistent with both our short term needs and long-term vision to be the leading global cannabis company. Bevo’s track record in generating not only positive Adjusted EBITDA but free cash flow, world class propagation expertise, and established distribution networks in Canada and the United States makes them an ideal strategic partner,” said Miguel Martin, chief executive officer of Aurora. “We expect this investment and collaboration between industry leaders will drive significant shareholder value and synergies for both parties. We are also excited about Bevo repurposing Aurora Sky and the potential to expand the scale and scope of their business and saving significant costs previously expected in connection with the wind down and sale of the facility”.
Leo Benne, president and CEO of Bevo, added, “Since inception, Bevo has taken great pride in utilizing state-of-the-art technology to become a leading plant propagator in North America. We are delighted to join forces with Aurora to pursue our high growth strategy, starting with our move into Alberta which allows us to significantly expand Bevo’s addressable market. We are incredibly happy that the Aurora team is committed to keeping all of our facilities dedicated to our customer base, and to expanding our operations into Alberta through the addition of the Aurora Sky facility. It is clear that the Aurora team is deeply aligned with our existing business plans and objectives for profitable growth, and we look forward to building upon the strengths of Aurora as a sponsor to accelerate our business.”
Supports Aurora’s timeline to profitability with positive and growing Adjusted EBITDA and free cash flow. The Transaction is aligned with Aurora’s plan to achieve Adjusted EBITDA profitability on a run-rate basis in the first half of fiscal 2023, as Bevo has consistently achieved positive and growing Adjusted EBITDA for over 10 years.Bevo’s management team is pursuing a high-growth business plan intended to scale Adjusted EBITDA from current levels, starting with conversion of the Aurora Sky facility for non-cannabis agriculture. Repurposing of the Aurora Sky facility is expected to generate revenue and Adjusted EBITDA with minimal capital investment needed to retrofit the facility, while saving on facility shutdown costs. This is expected to allow Bevo to greatly increase its production capability, extend its shipping range, and access new regional greenhouse demand in Canada and the United States.Bevo employs proprietary and innovative processes and greenhouse technology designed to provide industry-leading efficiency. Ability to leverage Bevo’s propagation capabilities is expected to enhance Aurora’s existing genetics licensing business (Occo) to create healthy clones for sale and could potentially lead to large scale cannabis propagation across the industry.Bevo’s management team will retain substantial equity ownership and partner with Aurora to drive profitable growth across both businesses. Bevo’s existing management team, who have a proven track record of achieving consistent revenue growth and driving EBITDA improvement through innovative agricultural processes, will remain in place with significant equity ownership.
Aurora is purchasing its controlling interest in Bevo from certain of Bevo’s existing shareholders (the Bevo Selling Shareholders). Total cash consideration paid by a subsidiary of Aurora on closing was approximately $45 million. Up to an additional $12 million shall be payable by a subsidiary of Aurora to the Bevo Selling Shareholders over the three years following closing of the Bevo Transaction, conditional on Bevo successfully achieving certain financial milestones at its Site One facility in Langley, which additional amounts may be satisfied, at Aurora’s option, through the issuance of Aurora common shares, subject to approval of the Toronto Stock Exchange.
Up to $25 million could be payable over time by Bevo to Aurora in connection with the Aurora Sky Transaction, based on Bevo successfully achieving certain financial milestones at the Aurora Sky Facility. Closing of the Aurora Sky Transaction is conditional upon receipt of certain third-party consents.
Lazard Canada Inc. acted as exclusive financial advisor and Stikeman Elliott LLP acted as legal counsel to Aurora in connection with the Transaction.
Agentis Capital Advisors acted as exclusive financial advisor and Fasken Martineau DuMoulin LLP acted as legal counsel to Bevo in connection with the Transaction.