Everyone, what is going on? Welcome into our latest TDR Trade to Black podcast. I am your host, Shadd Dales. It is a big podcast here today. As we know, Curaleaf trying to acquire Aurora Cannabis. We know how this has all unfolded in the last couple of weeks.
This has gone public, and it is probably the first M&A deal, if it gets done, that we have seen in over five years. Today, we are going to bring in CEO and Chairman, Boris Jordan. There have been 15 questions that have been pre-submitted by Aurora shareholders that he is going to address on record. The whole goal here today is to give shareholders, both from Curaleaf and Aurora, a better understanding as to where this deal sits in right now. Anthony and I will go back and forth with 15 questions. If you have any questions, outline them in the comment section below.
Back and forth with Boris to give you guys a better idea, if you are an Aurora shareholder or a Curaleaf shareholder, again, a better understanding as to where this deal sits right now. With that, let us welcome in AV here on a Thursday morning. Good job putting this together. I am sure a lot of people will be watching this live, and I am sure a lot of people will be watching this later today once we post this. Long story short, this is going to give a good, clear idea as to where things sit right now for shareholders from both companies.
Yeah. I am looking forward to this. It is clear, concise questions and direct from the horse's mouth with Boris giving his complete perspective on where things sit and his vision for this deal.
Indeed. With that, let us welcome in the chairman and CEO of Curaleaf, Boris Jordan, back to the podcast. Good to see you. How are you?
Good to be here, guys, and thanks for hosting this. We really appreciate it.
Well, I appreciate
Thank you.
you taking the time and giving us the, I guess, support and trust to put this all together. I am happy, Anthony and I, we appreciate you and the team doing this. Before we get into any questions, are there any opening remarks that you would like to address, Boris?
Yeah. I have an opening statement.
Okay.
Which I'd like to go through.
Yeah.
Then we can go into the Q&A. I wanted to make sure that, I want everyone to understand, there are prepared questions that were sent in advance, and I am happy to answer. I also want to make sure that anyone who has a question can ask it now, no matter how difficult it is, because I do not want there to be any feeling out there that I am hiding from difficult issues or questions. I want to be able to answer, as difficult as they may be, I want to be able to answer them.
Well said. Okay. Go ahead.
Thanks, guys. Again, hi, everyone, and thank you for joining us today. I would like to spend a few minutes talking about three subjects. One, Curaleaf and our offer. That is important because 80% of our offer is Curaleaf stock, so there may be people that do not know our company, so I would like to talk about that a little bit. The offering is a little bit complex, so I would like to go through what the offering is. I would like to also talk a little bit about what we see in Aurora, and I would like to tell people what our vision is for these two companies being together. As shareholders, those that are on here, whether you are a Curaleaf shareholder or an Aurora shareholder, you deserve three things. You deserve results, value, and a clear vision for the future of this investment.
We believe our offer delivers all three of those things. So here is what I would like to do. Let us talk about Curaleaf for a second. I have spent a decade building Curaleaf, and I have invested hundreds of millions of dollars of my own capital into this company. I think that that is one of the big differentiators of Curaleaf against a lot of other companies, in that I did not get my stock for free. I was not a founder that got the stock. I actually bought into a company called PalliaTech, and ended up starting to invest and working with the management team to build the company. So I have a tremendous amount of skin in the game, alongside all the other investors that have invested in Curaleaf alongside of me.
We are the largest cannabis company in the world with operations in 15 states in the U.S. and 17 countries globally. Last quarter alone, we did $340 million in revenue and $70 million in adjusted EBITDA. Through the first half of the year, Curaleaf generated net income of $82 million, $50 million of operating cash flow, and $17 million of free cash flow. Given the seasonality of our business, we would expect our cash flows to accelerate in the second half of the year as they do every year. Last year, we generated over $150 million of operating cash and $94 million in free cash flow. That means the strength of our operations funded by our obligations and growth investments with cash left over at the end of the year.
This year, analysts project Curaleaf will generate $1.45 billion in sales, up 15% from last year, and $284 million in adjusted EBITDA. We have some of the most well-known cannabis brands, both in the U.S. and in Europe. In the U.S., Select is the number one vape brand across our markets, and Curaleaf is the most recognized global brand in cannabis, and that has a lot of value to it. We have one of the strongest balance sheets in the industry.
We have $107 million in cash, and debt is just 2.3x adjusted EBITDA, a healthy, manageable level. Last quarter, our international business grew 26% year-over-year with real momentum in Germany, the U.K., and we are very excited about expanding into three new countries in the next few months, Spain, France, and Turkey. I am actually in Turkey right now speaking from here, where we are launching our new facility.
With a combined population of 210 million people between those three markets. We also have multiple growth catalysts ahead in the U.S. and beyond. Obviously, one of them being the Schedule III. I am not going to spend a lot of time on that, but obviously that is a major change in the U.S. market. The medical one has already happened. We expect the adult use one to happen literally imminently. It could be today, it could be tomorrow, it could be next week.
On adult use rescheduling, we expect to hear the update, as I said, in the next couple of weeks. We also believe that the 280E guidance that is going to come out is likely to be retroactive also for several years going back, which should give a lot of clarity on balance sheets, not only for Curaleaf but a lot of other cannabis companies in the U.S.
Obviously the hemp legislation that we expect to expire on December 11th is also going to help a lot of our businesses come back to organic growth as hemp was the largest drag on U.S. cannabis in the United States. When you look at Curaleaf, you are looking at a profitable cash generative global operator with a clear vision, a strategy to drive long-term sustainable growth supported by many regulatory and industry catalysts. Curaleaf's offer now to Aurora shareholders. Our offer implied $4 a share of value based on a combination of stock and cash when we first announced the deal. Let me break it down in plain English. For every 100 Aurora shares you own, you would receive US $75 in cash and approximately 35 Curaleaf shares. Before our offer, those same 100 Aurora shares were worth approximately $276.
We offered approximately $400 when we made our bid. That is a 45% premium. You do not simply cash out and walk away, you receive Curaleaf shares, so you continue to participate in Aurora's assets and the future of the leading global cannabis company in the world. As of last night's close, those 100 shares are now worth $421. Now representing a 51% premium.
To Aurora price before our bid announcement, which is a result of the fact that Curaleaf shares have outperformed, having increased 7% since we made the bid. When you are accounting for Aurora's cash on its balance sheet, our premium is 110% and represents one of the highest premiums in total Canadian M&A in the last 10 years. That means all M&A in every industry.
Yeah.
This is one of the highest premiums ever paid in Canadian M&A. I will be frank, the alternative for Aurora shareholders is reasonably bleak. A company getting smaller and less profitable by the day, a six-year turnaround that is still not finished, continued dilution without a clear vision, and a share price that has declined 97% under its current leadership. That is not a turnaround. That is six years of shareholders waiting while management collects their giant industry-leading paychecks. I have heard directly from many of you, more than anything, you want to know whether there is credible plans.
[Break]
ACB shareholders. This is not a story about bad assets. It is a story about assets that have not been able to perform to their full potential due to mismanagement. What is our vision for the combined business? From the start, our vision has been to create the absolute dominant, wellness-focused cannabis company in the world. Our international focus has been on providing high-quality medical cannabis products to patients in search for natural medicines. In fact, we have numerous partnerships in the U.S. and Europe with university hospitals focused on research and medical and wellness cannabis product development. We invest more capital in R&D than any other cannabis company in the world.
With Aurora, we can extend the lead we have today by creating an unmatched supply chain and leveraging our broad distribution network through which we sell excellent products and brands, all of which would generate approximately $500 million in international sales. Using Curaleaf genetics and our grow processes coupled with Aurora's indoor cultivation assets will create an unparalleled global player. We're very excited about bringing these two businesses together. This is the reason why we traded a premium to the group and always have.
It's because investors have confidence in our scale, strategy, vision, and execution. Why this combination works. When I first looked at the opportunity with Aurora, I immediately thought strategically, it fits like a glove. Together, we would create the absolute unquestionable leader in cannabis outside the U.S. On a combined basis, looking at trailing 12-month numbers, we're talking more than $1.5 billion in revenue with roughly a half a billion outside the U.S. Nearly $350 million in adjusted EBITDA, exposure to multiple U.S. regulatory and industry growth catalysts, and at least $40 million in expected annual cost savings. To Aurora employees, I want to emphasize that we see this very much as a growth story, not a cost-cutting story. We'd be honored to have you all as part of our future.
We plan to hold a separate session in the coming weeks for all of you, together with our CEO of International, Juan Martinez, to speak to you directly and answer your questions. Setting the record straight before we move into questions. I know there's been a lot of noise over the last few weeks. In situations like this, there's a lot of back and forth between both sides. Press releases after press releases. Pretty soon everyone loses sight of the question that actually matters. What creates the most value for shareholders?
That is what we laid out in the facts in our shareholder communication we posted online this week and on our microsite. You should also be receiving a hard copy in the mail. On those facts is that Aurora's own numbers point to a declining revenue, declining profitability, negative operating cash flow, and a business that management itself expects will become smaller and less profitable. These aren't our words, it's management's.
Yes.
Aurora's business update yesterday doesn't change that picture. Sequential growth off of a 20% decline last quarter is not a turnaround. It's just an easy comparison. Yet management still sold stock in the past few months through its ATM program, so their actions suggest a continued lack of confidence in the company's future. It's worth noting that they have reaffirmed an outlook that is still negative. At that point, Aurora's words and actions do not match. Even as Aurora says our offer is too low, management is comfortable with constantly selling stock at prices significantly below our offer, diluting your shares and making them less valuable. Think about that for a second. Management was willing to sell shares as low as $2.60 per share in July of this year, a 35% discount to our offer made three weeks later.
Now they are telling you that $4 is not enough, and $4.21 based on Curaleaf's share price last night. How does that make any sense? That's why we asked the Alberta Securities Commission to halt and remedy Aurora's share issuances while you consider our offer. You deserve to make this decision before management sells off the very value that you're claiming to protect. In Aurora's own words, issued in yesterday's press release, management appears ready to make more investments in Europe. If they came to the table to speak to us, they wouldn't need to waste shareholders' money. We already have these assets they are seeking to buy. In the U.K., Curaleaf is the number one player with almost a 50% share. The recent acquisition they made is money wasted since we already have the pieces in place. Cultivation, processing, clinic, and pharmacy.
Most importantly, if management genuinely believes $4 undervalues the company and they were truly interested in getting more value for shareholders, they would talk to us.
Yeah.
From day one, we've been ready to sit down with Aurora's board and discuss terms. Aurora would not sign an NDA. They have not had a single counteroffer. They have not engaged a single constructive discussion with us. They have not sent us a single counteroffer, not one. We're going into Q&A in a second, so I'll leave you with a couple of closing thoughts. If you can't tell already, I'm passionate about this industry. I'm passionate about this company, and I'm passionate about the vision we have for the future. You'll also see that I don't shy away from tough questions, so ask them. Challenge us. If there's something that we need to answer today, we will. If there's something we can't, we'll make sure we do it later. At the end of the day, this is your investment, your decision, your future.
With that, we are going into Q&A. Some are pre-submitted, some are coming in. Again, I want to thank The Dales Report guys, both Shadd and Anthony, for hosting this session. Thank you.
That is great. Great opening statement. Anthony, let us go into the questions. Let us begin with question number one.
You want me to bring it up?
Okay.
Yeah.
I will bring it up. For Curaleaf shareholders, what makes Aurora the highest return use of capital versus organic growth, debt reduction, buybacks, or another opportunity?
Listen, I firmly believe that the number one thing a company has to do is it's got to invest in growth. It's got to continue to grow, it's got to continue to dominate, and that's what this investment is about. We are investing in growth. We are investing in the supply chain, and we're investing in the fastest-growing markets right now in cannabis by making this investment. We are not worried at all about debt. We're very comfortable where our debt is. We are paying down some of our debt, and we have plenty of cash to do that. We pay down about $3 million of debt every single month right now. We are paying down debt, but growth for us is more important because growth brings cash, and then cash then you can do other things with.
You can either invest in your business, you can buy back shares, you could pay down growth. Curaleaf's doing all three, just to make sure. We're investing in growth with this deal, we are paying down debt, and we have been buying back shares. We're doing all three of those things. But in that priority that we think is the most important, growth is first.
Hmm. Anthony, go ahead with question number two.
This is Aurora's strongest argument is the value of its international medical business. What can Curaleaf do with that platform that makes it more valuable inside Curaleaf than as a standalone Aurora asset?
Listen, I want to make something very clear. First of all, I believe this industry needs to consolidate.
Yeah.
This is a scale business, right? Whether you're medical or you're a consumer products recreational cannabis, these are scale businesses. A lot of these small companies just can't survive at this scale today. If you look at just even Aurora's numbers that they've just put up in the last quarter. They did $212 million in medical revenue, $219 million total. They had gross profit of $120 million, but their OPEX was $128 million. They lost $8 million just there. Curaleaf has invested $500 million, real dollars, in their international platform. They don't have the kind of capital, there isn't the capital available today, in order to be able to do that. It makes sense for them to consolidate into a larger player and give their shareholders an opportunity to participate in the upside on that deal. There isn't a real business there, right?
They've jumped from adult use to not adult use, medical to not medical. They've picked certain segments that are getting cut. We have a distinctive strategy, and we also have a very diversified portfolio, and that's a major important thing for shareholders of Aurora.
They don't have a diversified. We can lean on our U.S. business, which is a $1.2 billion business today. We can lean on our international business. We're opening up new markets. It's a smart investment for them to do.
I think when you look at this, you've been pretty clear that the offer represents full and fair value. But what are the two to three assumptions that matter most to that valuation, and where do you think Aurora's board sees the economics differently? Because we've learned that they do see this differently so far.
Well, listen, I can't tell you what the Aurora board thinks because almost every shareholder I've spoken to, and by the way, I've spoken to senior people within Aurora that don't want their management to know, and they have said that they believe that over 50% of the shareholder base is supportive and the majority of the employees have supported this transaction.
I know by saying that probably Aurora will come out and say that's not true, but that is true. We're talking to employees, we're talking to shareholders all the time. As I said, the value is in the global platform that Curaleaf has built. You are being bought in and merging because you are getting 80% of Curaleaf stock. That was done on purpose, guys.
Listen, we could have put a cash bid together. We had plenty of banks that would finance a cash bid from Curaleaf on this deal. But we did this because we wanted the Aurora shareholders to participate in the catalysts that we are about to have in the U.S. If they move fast, I know there is another question about the deal structure, but if they move fast, they will understand one clear thing. They will get the Curaleaf shares faster, and they will be able to participate in that upside on the U.S. catalyst side much, much faster.
Right.
By dragging this thing out for the 110th saturated. Many people do not know this. In Canada, you could close this deal in 35 days.
Yeah.
If there is an agreement on both sides. By dragging this thing out, they are hurting their shareholders of not being able to participate in the upside in merging this business into a company like Curaleaf.
Yeah. I have been scratching my head saying the same thing with the upside from a rescheduling catalyst. Why would you not want to get this done in the sum- of- the- parts game versus the standalone? Especially in due time versus dragging this out.
A 51% premium as of yesterday, correct?
That's right. As of yesterday's close, it's a 51% premium. As Curaleaf grows because of the $5 cap, their premium will grow. This is a very attractive deal, and I do not understand why. Frankly, I'm not in the old days, remember the 1980s when these guys used to raid these companies, but it almost feels like that. You have like.
Yeah.
Remember the movie Wall Street where these guys are sitting up there and the guy's asking, "What the hell are you guys doing?
Yeah.
It almost feels like that, guys. Yes, you're getting good salaries, but look at their. When we looked at their recent proxy, when we looked at the way they have structured their buyouts. They all get these huge golden parachute packages. Let me tell you something about Curaleaf. I don't get any goddamn fucking package if my company gets bought. I get nothing. Because I wouldn't even think of going to my board with that. My job is to build the company.
Yeah.
For growth. My job is not to sit there and try to flip it and make money for myself. My job is to make money for my shareholders, of which I am the biggest one.
Let me go off script. For the investors of Aurora that say, "Look, if you want us, offer us more. Right now, it is not enough." What is your response to that?
Come and talk to me.
Yeah.
I have made an offer. Make a counter. They have made no counteroffer. They have had no contact with us.
Did you anticipate that they would, I don't want to say drag their feet, but just refuse to even give you a counter at this point in time with the process?
I'm going to quote someone, not going to name them. I was told this by a certain senior manager of the company. All things being equal, Boris, I'd like to run this company for another five years. Let me tell you something. If there's somebody that's better to run my company, please.
Yeah.
Tomorrow. I'm a shareholder. My first thing is I want to make money.
Yeah.
That's how I look at things, right? I want to make as much money on this investment as I possibly can. I am not holding onto my seat as a CEO. It's an irrelevant fucking rounding error, as far as I'm concerned.
Yeah.
I want to make big dollars, big multiples on my investment in this company.
Right.
If there's somebody better to run this company, let them come in and run it.
Yeah.
But I personally think these guys are I hate saying this, but they're trying to hold onto their jobs.
Yeah.
There is no reason for Aurora to be independent. It has no chance to compete against global players like Curaleaf in this environment.
If it is not going to be them, we are going to do something with somebody else, and their shareholders are going to lose. Because I do not believe there is a white knight out there that has our balance sheet, our positioning, our distribution, our new countries that we are going into right now to make this investment as efficient as it is going to be with Curaleaf versus somebody else. So sure.
Yeah.
There might be somebody that they drag out, but there is not going to be anyone where it fits as good as into Curaleaf, and that has the same catalysts and upside that Curaleaf does over the next three to six months, where these people can make, the Aurora shareholders can make a lot of money.
Okay.
Yeah.
Well said. Well said.
Next question, guys.
Do we want to go question four? I think he actually touched on the significant debt portion. We can talk about that, or we can move to question five if you want, Anthony.
Yeah, I think, Boris, you can give a little bit more color on this. Aurora's claim Curaleaf carries significant debt. How do you manage that without diluting Curaleaf shareholders? You said you're repaying on a monthly basis.
Right now, correct? Versus shoring up that debt on the balance sheet.
Listen, our debt is at 2.3x EBITDA.
Got it.
Very, very manageable from our perspective. We're generating a tremendous amount of cash. It is not something I'm worried about. I keep seeing this on Twitter and stuff like that. People just don't understand businesses.
Correct.
One of the reasons Curaleaf carries slightly more debt than our competitors, because I put $500 million into building this international franchise. There's your number. If you look at our leases, those leases are running off over the next five to six years, right in time for when I think you're going to get interstate commerce coming into play. Curaleaf is a well-planned company.
Yeah.
Nothing is by accident. Have we made mistakes? Absolutely. Absolutely, we've made mistakes. We've exited markets. Everyone's going to make mistakes when you have such a fast-growing business.
But the fact is, we have well planned what we are doing. We know what we are doing. We have a strong balance sheet, and frankly, we also have strong shareholders, right?
Mm-hmm. Yeah.
This is not my only business. Right? If there was actually a problem, Curaleaf would not have a problem. It has got me.
Yeah.
Not only is the CEO committed, but also somebody who has got capital. Notice, I have not had to put every capital raise this company has done, whether it is debt or equity, every single one, I have been a big investor. So I have put my money where my mouth is.
Yeah.
I believe in this business, and shareholders should be comfortable with that because they're looking at someone that's got hundreds of millions of dollars invested in Curaleaf.
Yeah. I think it's also important to outline too, that a lot of mistakes that U.S. companies have made is mistakes that are beyond their control, and that's from a regulatory front as well. Timing, things get delayed. I get it, and this is why it's been long drawn out. You also point too that the time has come for change, and it looks like it's here. So you have that upside potential as to what we just outlined. Everybody knows from Wall Street to Bay Street in Canada right now that the opportunity that we're looking at is the U.S. opportunity. That then segues into international as well, which is the future in a lot of ways. Continuing on, the next question is, why does the offer include an exchange cap? Explain what that is and why structure it this way.
Great question, and really important to understand. For the U.S. cannabis companies, right?
Right.
We are going to be potentially significantly revalued on the back of these regulatory changes that are happening. Frankly, they're happening now.
Under Canadian rules, I have to keep this offer open for 110 days. What happens if Curaleaf revalues 2x, 3x during that period of time? I end up paying like $900 million for Aurora. That's just insane. Doesn't make any sense.
Yeah.
I had to cap it. But with that, I've offered them another dollar. The fact is, it is likely that they're going to get that dollar because Curaleaf is appreciating right now. Curaleaf has to get to $17, and they get their $5. We're trading, I think, at $14 now or something like that. $14 something or something like that. It is likely that they're going to get the $5.
But the cap is there to protect the Curaleaf shareholder.
Hmm. Okay. Well said. Anthony, go ahead.
For a shareholder who just wants liquidity, why tender to Curaleaf instead of just selling Aurora shares on the open market today?
Listen, it's a free world. That's what I love about capital markets. You want to sell and take the 40% premium? I'm super happy for you. You've made your money. You've got now. A lot of shareholders in Aurora, unfortunately, have been in the stock for a long time. Right?
Yeah.
They've been in it for Let's be honest, guys, this stock traded at over $1,000 at a certain point in time. Right? There's a lot of people that, I think the term is called bag holders, that would love to make their money back. That's another reason why I've offered stock as an alternative, because people then get to still participate in the upside to make capital back in a much bigger, much more diversified company that they're in today.
Okay.
That's one of the reasons that I structured the deal the way it is, and I think it's a well-structured deal for people. Again, if shareholders put pressure on the board and on the company and they write them, we can get this deal done in 30 days.
Yeah. I think this is a great
We can all force these guys to the table.
This next one's a good question, and it's from an actual Aurora shareholder who watches the show. If Aurora can't compete, as you've said, how does that track with leading positions in Canada, Germany, Poland, Australia, and New Zealand? They have no debt, substantial cash, EU GMP assets, and has reaffirmed growth. I don't think they are a leading position in Canada as a catalyst to that.
They're not leading anywhere except Poland.
Okay.
Let's be completely honest. Poland, because they got there early.
Yeah.
Good for them. Congratulations. I always give people credit where credit is due. They are a strong player in Poland, because they got there early, and they built a good business there, right?
Good for them. But together with our business, that will be the absolute dominating business in Poland. The other thing I will tell you, though, about their none of the other markets are they're domineering or leaders in. They're just not.
Yeah.
They're not even on the radar screen, in those markets, except Australia, where their business is declining every quarter, substantially.
It has been a major drag on their business. I just want to make a clear point that by combining that into our business, they are going to be able to do substantially better than they are doing today because we working together are going to win. They have a 50% SG&A. Over 50%, guys. To our 27% in our international business. U.S. is 29% now, but international business is 27%. One of the reasons their SG&A is so high is their marketing spend is $65 million on a business that generates $212 million, whatever it was I said. $65 million.
On a medical basis?
In marketing costs. Curaleaf, which is a $1.45 billion business, runs like a $22 million, $25 million marketing budget. Give me a break.
Yeah.
Are they really selling their product in these countries, or are they basically pushing their product with their marketing? Give me a break.
Yeah. How much are they undervaluing your distribution, how it can accelerate their revenue if this deal is done, pairing their cultivation with your distribution in the EU on a go-forward basis that I think they are not recognizing at the end of the day?
I do not think they understand what Curaleaf has because they have never talked to us.
Okay.
I do not think they understand the power of our business in Europe. We are the global leader in all those markets, except for Australia. We are a small player in Australia, but there is a reason for that. Australia, like California right now, is in a very difficult place where the plumbing is all wrong, and it is almost impossible to make money. So I am not going to go and put real dollars, substantial dollars, into a business that is going to lose me money. I am focusing on those markets where I can make money right now. I have a small presence there to make sure if the situation changes, I can quickly ratchet up. But I do not invest in markets where we are not going to be able to make money.
Yeah.
That is our focus right now, is invest in those markets and make money. By the way, Turkey, France, Spain, all of those markets are substantial. Now, they have a presence in France, but working together with us and our partner, we are about to announce a partnership with one of the major pharmaceuticals globally in that market. That will be a huge win for both companies. If they sat down and talked to us, any rational being in the investment world would say, "Holy shit, this is a match made in heaven. Let us do it. Let us take the stock and let us ride this thing together.
Yeah.
But we're not having that conversation.
Yeah. Retail investors, they get emotional with certain stocks, and they get attached to them and fixated on it, and that's the reality in today's world, more so I think now than we've ever seen before. Saying that, if you are speaking to them, next question, is this Curaleaf's best and final offer, or could terms change as the process continues?
We are very comfortable with the offer we've made. We've received no counter. We don't see a white knight. We have no reason to raise our bid. Even at this bid price where we are now, shareholders make a lot of money. They get the upside in the Curaleaf. Again, a lot of people don't realize they are swapping 80% of their Aurora shares for Curaleaf shares. That's what gives them the upside in this deal above the 45% we're already giving. By the way, I want to make it clear again, we are paying one of the highest multiples ever paid in Canada in an M&A deal. People don't seem to realize that. They're just emotional, as you said, Shadd, because they hold the shares. The one thing I want to teach, something that I worked a lot with George Soros.
I can tell you right now, one thing he said to me, "Boris, don't get emotional about your losses.
Yeah.
Okay. The losses are there. You got to take them, and you got to move on.
Yeah. You're right.
Same thing here. Sitting there and saying, "I paid $15, and therefore you need to pay me $15 a share," that's just hogwash. Curaleaf traded $23. My stake in Curaleaf was worth $4.5 billion at that point in time. Do I get emotional about the fact? Yeah. I was stupid not to sell. The fact is, I took it where I am. I stepped in as the CEO, and I said, "I'm going to fix everything, and I'm going to make it worth $4.5 billion again.
Yeah.
That's where I am. That's what these people, I'm giving them the opportunity to step into Curaleaf alongside me, that a person who's got a tremendous amount invested that is going to work day and night, even at my crazy 60 years of age, because I believe in what I'm doing.
Yeah. Acceptance is clarity, is it not? Gets you into action mode, is it not?
It does.
Yeah. That is for sure.
Good way to put it.
Yeah. Anthony, go ahead.
You spent weeks calling Aurora's management ineffective. Isn't it a little rich to now be fighting this hard to acquire the company they've been running?
Listen, management and the company are two separate freaking things, right?
Yeah.
Listen, I had a nice life in Boca Raton, Florida.
Okay. I'm now living in fucking Stamford, Connecticut. Okay. I'm in my office every day.
Yeah.
Their CEO lives in, I think, North Carolina.
Yeah.
Their company is based in Toronto or Vancouver or something like that. Guys, I am committed. I am working hard. That company's assets are better with Curaleaf than they are with their current management. I think I've made that point.
Yes. Yeah.
Their assets will perform at a double the rate they are today. One of the other questions, I do not know if it is here, but I was asked this morning is, "Boris, if you are getting all these synergies, why are you not sharing those synergies in this bid?" Well, first of all, I am. I am paying a 45% premium to the stock.
Yeah.
Second of all, the synergies are not cost synergies where I am going to cut out their employees. That is not the point. I actually need their people. The business is growing. The synergies are in my know-how. Things that we have built over 10 years at Curaleaf, where we are able to, for instance, take their facilities, the ones they have today, and double the capacity out of them because of our know-how. The genetics that we invested in, that grow in those facilities much better than they would grow somewhere else. These are things that we have developed and invested hard dollars in. That is where the synergies are coming from. Are there going to be some cost synergies? Sure. But those synergies are a minuscule part of the 40 million.
Sure.
Most of the 40 million comes from Curaleaf's know-how that is going to make those facilities and those will perform better.
Something important to discuss too, I want to segue into the next question. How do you view the possibility of a competing bidder? What differentiates your offer from any other alternative that may emerge here in the future, if possible?
Well, first of all, to make this bid, you have to have the international footprint that we have. Unless you want to be like, for instance, I look at my competitors in the U.S., are they going to go in, buy this thing, and then have to put in another $500 million into building the distribution that I have built? No. They would rather put that, and rightfully so. They are smart guys. They would rather put it into Texas, Virginia, Georgia, the U.S. markets that are coming online, as will I as well, in addition to what I am doing. But I already have the sunk distribution in business. I had the foresight to go do it. I operated in Europe for 30 years. I built one of the biggest data center companies and one of the biggest insurance companies there, as an entrepreneur. I know the landscape.
I know how to function in that market. It was right for me to make the decision to go into that market and build this business. It was right for Curaleaf. It is not right for everybody. Will those guys come eventually? They will. They will probably do it through acquisitions of bigger platforms. But this is not that kind of platform.
This is mainly a cultivation business. It is not a distribution. They just spent $2.5 million buying some rinky-dink licensed company in the U.K., which will take 10 years to build out to what we have in the U.K.
That is brutal.
They will have to spend $100 million to do it.
I think the thing you are pointing out here, and I am learning too, is to understand what you are invested in, right?
You got to know where you stand, and it is what I said to an investor who talked to me today, going back to that line from "Gladiator," right in the beginning, where the officer is talking to the general, and he says to him as they are about to go to battle with the Germanians and the Romans, and he says, "The Romans say," he looks at him, "Some people do not understand that they have been beat." Right? Guys, there are companies that need to be consolidated into the big businesses. It is not that they have had bad businesses, although Aurora, let us be honest, has spent billions of dollars over the years raising money and restructuring and changing strategy and doing that. Let us be honest, it is a $200 million business now, right? Guys, it belongs. They have a good asset.
While it is still good, get your shareholders paid by merging it into a superior player.
You said this back in June in Chicago, that there is too many companies, and there is going to be a lot of M&A, but we all need to put our egos aside. I think this is the challenging part that we are in now, is just that, yeah, some business deals do make sense, but how do you make that happen? Because, yeah, there is a lot of personalities at play, and this is kind of a demonstration as to what kind of new era that we are in this particular space right now. Granted, we do want to have them on, and we want to hear their side of the story as well. But at the end of the day, I think it is smart that you want transparency, then make yourself available and let us talk about some of the issues.
Good for you to make the first step in a lot of this stuff.
Shadd, it is ego and it is greed. One of my mentors.
Good point.
30 years ago said to me, "Boris, remember one thing. Skinny pigs get fat. Fat pigs get slaughtered.
Good point.
Yeah.
Yep.
Very accurate. Okay, Boris, how does Curaleaf view the possibility of a competing bidder?
Oh, we asked that.
You just.
Yeah, we asked that one. Yep.
Yep. Aurora has raised concerns with regulators about Curaleaf's offer. Can you address those and whether they are likely to affect the outcome?
No. The concerns were like, we put the wrong time of day when the tender ends, so we wrote 12:00 P.M. It has got to be 5:00 P.M. So we fixed it. We went to 5:00 P.M. Guys, there is nothing there that is real. We have done everything we have got to do. Obviously, we are going to follow all the rules and regulations of this deal. We are not going to violate any of it because we understand that that is the ability for entrenched management to try and scuttle the deal. We are not going to make that mistake.
Yeah. Question in the comment section. I am going to ask this, and I think you have already answered this in a lot of ways, but I think it is a reminder for a lot of shareholders of Aurora. Nick said, "Boris, you said Aurora sold stock as low as $2.60 in July. That is 35% under your $4 offer. If $4 is too cheap, why was Aurora management selling under the bid?" Again, it is a very important question that people need to be reminded of. Again, I will say, understand the company that you are in and what you are investing in. That is a question that if we get Aurora management on, that is one of the first questions that we have to ask. Anyway.
But also the thing I do not get is forget about even the price, although that is really weird.
Yeah.
But the real thing is when you have $145 million of cash on your balance sheet, why are you doing it at the market deal? I mean, why? The other thing I will tell you is, I do not know of any single U.S. MSO that has done that, right? We manage our businesses to where we can have cash flow so we can pay our expenses, our bills, our debt, without having to do that. These ATM programs are really bad from a shareholder perspective because it is an uncontrollable dilution of the company that happens all the time. I do not get it. I would never have one of these programs at Curaleaf. I am telling you right now.
Yeah.
Yeah. That has been the most perplexing part of this entire thing, to me at least, knowing what I know about capital markets, the fact that they have $150 million in the bank and they have an active ATM that is raising $2 million-$3 million in increments. It makes zero sense. I have reached out to Miguel. He has an open invite to come on the show, and that would be one of the things that I would be most curious to hear his thoughts on, is strategically why that is going on.
Why do companies do that? Any idea?
Well, you do it to raise cash, but they do not need to raise cash.
Well, that is my point. In this particular case, why would companies do that? I guess, tough to answer. Very.
Listen, it is beyond my comprehension. Generally, I do not like that structure of capital raising. I do not think it is the best way to raise capital. I think it creates all sorts of bad incentives.
Yeah.
For management, and it is untransparent to shareholders for many ways. I would never. Just like I have no warrants. I have never done anything like I am a purist in that there is equity and there is debt, and that is the way I like to manage my business, and it is very transparent that my capital structure is as simple as you can possibly imagine. There is equity and there is debt, and there is none of these derivative instruments or anything like that.
Yeah. Another comment. Why would ACB sell before the biggest catalyst in history? All stocks prices are suppressed right now. Fair point.
No. That is a terrible point because they do not.
Terrible point.
Participate in that. Even if they get a one-day bounce, it is going to come right back, right? Aurora has no U.S. exposure. They do not have any of the benefits that we are getting from the rescheduling in the U.S.
Fair point.
That is another issue, right? That is very important. Somebody could turn around and say, "Boris, but your stock is down 70% from its highs and theirs is down, it is 90%. You are also a failure because your stock is 70%." I have gotten DMs like that. The fact is that the reason my stock is down is completely different than the reason their stock is down. They already trade on a major exchange. They have access to any capital that they want.
They have banks that service them, like BMO and others, that will give them loans and stuff like that. They have markets that are completely legal. We come from a market where nobody likes us. The regulators do not like us. We are federally legal. Our capital costs are high. We trade on third-rate exchanges, all of that. In that environment, I built a $1.5 billion business. Well revenue, market cap, call it, $2.5 billion-$3 billion, whatever it is. I do not audit shit every day. Whereas.
[Break]
I traded at $2.6 billion- $2.7 billion valuation, right? So I am the exact opposite of their situation. I have actually built a huge quality business, but I have not been able to get the valuation because of the restrictions on investment into our sector right now in the U.S.
Yeah.
Whereas they have no restrictions, and they have actually, their business and their market cap have collapsed. Now explain that to me.
Yeah. Fair point. Getting more comments coming in, but I think the reality is, as you said before, we got a lot of long-term shareholders involved with this, and they just want more. At the same time, too, and I think it segues into our question again. Given the announced synergies of at least $40 million, should Aurora shareholders not receive more than $4 U.S.? You have mentioned this before, but I think people need to be reminded again as to why.
Again, the synergies come from our know-how. Is NVIDIA going to give their special chips to a Chinese company and then also pay them for it? No.
Right.
I'm not going to give my know-how and then pay for it.
Correct.
Absolutely not.
The synergies are coming from my know-how and my R&D and all the work that I put in, all the investment I made into my business. I've given a 45% premium. This stock was going down every day until we showed up.
Good point. They go.
By the way, guys, they are guiding lower. Their official guidance is lower, not up.
Curaleaf, in the last four quarters, has beaten and raised every single quarter.
How do you compare those two things?
Fair points.
Yeah.
Number 11. Go ahead, Anthony.
How do you respond to Aurora shareholders who argue that if they wanted exposure to Curaleaf, they already own Curaleaf?
Great. Love to have them. Maybe they want some more. Listen, I think that let's be completely honest about what's going on right now. There are over 350,000, as I understand, Aurora shareholders at the time I announced this deal.
Okay.
I can tell you right now that already, a lot of those shareholders have sold. In the last four or five days, I have been contacted by numerous funds that have said, "We have accumulated 5%, 2.5%, 5%, 2.5%." I think it is almost 20%, 25% now.
Wow.
By the time this deal.
They turned the float recently, haven't they?
100% of the float has turned over since we announced the deal.
Yeah.
The retail presence in this deal, by the time this deal comes to tender, is not going to be that high.
Okay.
I am hoping those institutions are going to go to the shareholders and say, "Sit down with Boris and have a conversation.
Yeah. Mm-hmm. Yeah.
Have a conversation, guys.
Yeah.
That is our problem. What am I, stupid? I am going to be competing against myself. I am going to go out and raise the price. What am I? I am not an idiot. I hope my shareholders, they understand that I am a good steward of capital. I am not going to do something stupid.
Conversations need to be had. Long overdue. Let us switch our attention now up north. What do you intend to do with your business in Canada? Will customers still get medicine from you there? Are prices going up? Your response.
Listen, we have to obviously get under the hood to look at the business. They have not given us any ability to do due diligence. That is why we had to go with a public deal rather than a privately negotiated deal. I cannot tell you much except what I can see through public numbers. Through public numbers, obviously, and I think they have made the right decision, they have exited the adult use market, because they could not make any money in it.
Right.
They stayed in the medical market. They are having some problems in the medical market, even though they have actually a very interesting niche. They do sell direct to veterans, which is a very high margin. Most of their margin comes from that business. Their gross margin comes from that business. Now, it is incredible, with a 58, 59% gross margin, somehow they cannot make money. I do not understand that. I would love to have a 70% gross margin in my U.S. business. I would be making money hand over fist.
Yeah.
But somehow they cannot make money with that kind of margin. But that business has been cut back by 30%. In Germany, they also got into the insured business, not the self-pay business like I am, and that business got cut completely now in Germany. So they are struggling a little bit, and we would have to look at those. But the answer is this. If the business makes sense, and if I can make money, my first and foremost priority is to the shareholders and to my customers. Right?
Yes.
So obviously, we want to continue to service especially the veterans in that market. So we would most likely definitely stay in that business. But we would also evaluate everything else in Canada in some depth to make a decision as to whether we want to participate in that. Definitely Canada is going to come back. Guys.
Yeah.
You cannot have a country like Canada that does not have a profitable cannabis business. It is going to have one. It is going to take a little time. It was on its way. It was on its way until this nightmare with Europe happened where they all started producing again, overproducing. One of the reasons I am bidding for Aurora, and their product was failing because it does not meet microbials, and then they were dumping it on the Canadian market.
Right.
So it went full circle. It was coming back.
Okay.
Margins looked like it was improving. The Canadian market looks like it was getting better. They started again, overproducing. I don't know what's with the Canadian growers. I don't know why they can't get their act together. As I told you, less than 1% of our product in the U.S. fails. Literally, I'll tell you something else that's interesting.
Yeah.
We have a woman that runs all of our EU GMP certification out of Germany. Very strict German person. By the rules. She came to us, she came to Canada, she looked at all the cannabis, she was like, "Holy shit, this is a nightmare." She came to the U.S. I was expecting her to walk through our facilities and say to us, "Oh my God, you guys have to put so much money into this. This is a nightmare." She said, "Holy Jesus, these facilities are good. I can get you EU GMP certification like that.
Yeah.
The U.S. players have actually built good, solid, even without having to qualify for these or register as EU GMP, we've built, and I'm not saying only us. There's been GTI and Verano and Curaleaf, but we've all built quality facilities. Yes, we'll have to go through some changes, but not as much as I thought originally, because she came over, and she said, "You guys are 95% of the way there in the U.S."
That's mind-blowing when you think of how much money's been allocated to some of these grow operations up in Canada. I've seen them firsthand. These are hundreds of millions of dollars.
Shadd, it is the biggest question mark I have. I don't know what happened up there. I don't know what happened up there. I literally don't.
A lot of money. I've seen it firsthand. It's like that wild.
Yeah.
Interesting. All right, we're down to our last question. Anthony, you want to fire away with that?
Yeah. How can Curaleaf ensure successful post-merger integration if the deal does in fact go through?
Listen, this is what I do. I bought 26 companies to build Curaleaf to what it is today. I bought, I think, seven or eight in Europe alone. That's what I do. I've been doing it. I've been a consolidator my whole career. I did that in the data center business in Europe. I've done it in the insurance business. I did it actually in Canada in the Bakken oil business as well, a company called Innova Exploration, which I did, and then I sold it to Crescent Point. That's what I do. I buy and consolidate companies, get the synergies out of them, build very solid businesses, and either take them public or sell them to strategics or create companies that can compete as number one. That's what I do. I know that very well, and so I feel very comfortable.
This is going to be one of the easiest deals, to be honest, we've done.
Yeah.
It is going to fit like a glove into our infrastructure, and it's just a great transaction. I don't see a lot of work on this one. We've had some problem deals for sure. This is not one of them.
This is one more question I think that's probably good for an ending note. How would a favorable resolution to the AU rescheduling process in the U.S. impact Curaleaf's willingness to raise the.
It doesn't mean I will go out and abuse it. Notice, I have not done a deal in three years. I will not go out and abuse my shareholders. I walked away from a Virginia asset. I will not go and abuse my shareholders or my premium because that's how you lose your premium.
Yeah.
You bid what a business is worth, not because you traded a premium.
The premium that you offered here, you felt this is what the business is worth right now?
Absolutely, especially because I couldn't even see it. They wouldn't show it to me. I offered to them to sit down, sign an NDA, let me go and due diligence, and I don't know what price would've come out of that. It could've been lower, it could've been higher.
Yeah.
This is the price that I put on the company based on public information that I received.
Interesting to see. There is a lot of upside potential here. We talked about other things that I think will indirectly help a lot of U.S. players with the rescheduling of cannabis as it appears around the corner too. All in all, there are some interesting times, obviously, for the U.S. landscape right now. Then once you factor that in, what that international opportunity presents, and in this case, obviously, what this whole acquisition pertains to. I think that pretty much wraps up basically our questions. I do not know if there is anyone else that has any questions, but again, really appreciate you doing this. We are about an hour into here, but I think we have gone over quite a bit.
Shadd, let me just finish by saying, this is a great deal for both Curaleaf and Aurora shareholders.
Yeah.
I am super excited about it. It really is a match made in heaven. I looked at five companies in Canada, and by the way, there are other quality companies, that if this does not work out for one reason or another, we will look at. Hopefully they are not like this, they are friendly.
Yeah.
I did this one because it really was the best match for Curaleaf and for, I think, Aurora shareholders. I am super excited about it. I beg those people that believe in us and believe in Curaleaf and in me, write your board, write your CEO. Tell them to sit down at the table and have a conversation. I think that is the way to do a deal. Not through, no offense, guys, and I love you guys, you are great, but not through the public conversation, but through.
No.
sitting down and having a negotiation.
Yeah, absolutely. I couldn't agree with you more. Well said. If you need us in the boardroom to moderate it too, with our whole deal. It would be like Vince Vaughn in that first scene in Wedding Crashers where they are trying to get themselves set up with the divorce papers.
With the arbitrators.
That is the next move for TDR, huh?
I guess so.
Yeah. Arbitration.
All things considering, right? Anyway, listen, good to hear from you. Thanks for taking the time, even though you are overseas. When you get a chance, make sure you get some business cards from me across the street because I need to get a hair transplant. I am losing my hair. It is getting older. Good seeing you. More importantly, I think this hopefully gives both Aurora and Curaleaf shareholders a clear understanding as to where this deal sits right now. The big takeaway here is that, look, the offer has been presented. Let us hear back to have some dialogue and you are open for conversation and transparency. I think you have answered a lot of questions on whether you are a short-term or long-term shareholder of Aurora. You look at what you are going to get in return, what the upside potential is.
That yes, if you are a bag holder in some sort of ways and have lost a lot of money, you have factored a lot of this stuff in when it comes to acquiring this company and becoming Curaleaf shareholders for a lot of the Aurora shareholders. More importantly, I think let's have some conversations and see where this goes, right?
Yep.
Yeah.
And we would love to do the same, obviously.
Yeah. Well said. All right, Boris, appreciate your time.
Thanks, guys. I appreciate your time.
Thank you.
Take care. All right. Fair points. When this deal was announced, like he said at one point, as of yesterday's close, it's now a 51% premium.
Yeah.
We've talked about this.
Next 90 days is going to be interesting.
Next 90 days are going to be very interesting. I think it was like 105 originally or something along those lines, and now we're down to X amount of days.
Yep.
He made it clear, hopefully something gets done with this. If it doesn't, then he's definitely got his eyes on other players in Canada as well.
Absolutely.
All right, my friend. Good stuff. Thanks for putting this together. Everybody, thanks for logging on and submitting your questions. Back here later this afternoon at 4:00 P.M. with Trent Woloveck from Jushi. We'll get his latest news from all the news regarding adult use in Virginia, plus we'll get a PA update, and we'll probably talk about hemp a little bit too. Adam Stettner will be on for our second segment for his weekly appearance. That's coming up today at 4:00 P.M. on The Dales Report, presented by Flowhub. We'll see you later today. Thanks again, everyone.
Bye-bye.
Hey, everybody. Thanks again for watching. Quick reminder, right now, we only have 40% of our audience that consumes our content is subscribed. If you can, make sure to subscribe to our channel here at The Dales Report. We'd appreciate it. As usual, leave some comments below and let us know if you have any questions from today's livestream. We'll get back to you as soon as we can. In the meantime, enjoy the rest of your day, and we'll see you next time on our latest The Dales Report Trade to Black livestream. I'm your host, Shadd Dales, and thanks again for watching.