Liquor Stores N.A. (TSE:LIQ) has today announced that Aurora Cannabis (TSE:ACB), Canada's largest cannabis producer, is to buy a $103M CAD stake in the company. The stake is worth 20% of Edmonton-based Liquor Stores, though the two-phase investment structure could see Aurora increase the stake up to 40%.
Liquor Stores' stocks surged on this morning's announcement, currently valued at $12.11 CAD, up 3.68% at the time of writing. This brings their market cap to $362M CAD and helps mark a highly successful start to the year which has already seen a 52-week high of $12.90 on January 29th.
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The Edmonton-based liquor retail giant, which includes brands such as Brown Jug and Liquor Depot, will use the funds to establish a new brand of cannabis retail outlets. It will convert some of its current liquor stores to achieve this, as well as opening new ones. Liquor Stores is ideally placed for such a venture; it has a large retail presence in Alberta, one of the provinces which will allow private retailers to sell recreational cannabis. It currently operates around 240 stores in Canada and the U.S.
In a joint press release, the companies state that the deal will enable Liquor Stores to 'establish a leading retail brand in the cannabis sector, which is anticipated to be one of the strongest growth markets in Canada's retail sector,' while Aurora CEO Terry Booth said it marks 'an extremely significant step in our corporate development.'
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The deal is clearly a long-term investment by Aurora. By owning a large portion of a cannabis retail brand, they can expect to further cement their already powerful position in the industry when cannabis is legalized recreationally across Canada later this year. The purchase is part of a recent growing trend which has seen Aurora further consolidate the Canadian cannabis industry. Last month, the company made the largest deal in the history of industrial cannabis by purchasing CanniMed (TSE:CMED) for around $1.1B CAD. Unsurprisingly, stocks in Aurora are performing well today, currently valued at $7.56 USD, up 10.26% at the time of writing and bringing their market cap to $3.48B USD.
Investors are becoming increasingly interested in Canada's cannabis industry. While some warn that the recent boom is part of a bubble ready to burst, others are optimistic about what will happen when the country rolls out total legalization in July.
Featured image: CBC.ca
