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Mar 13, 2019

Aurora shares surge as billionaire Nelson Peltz hired as advisor

Nelson Peltz could become Aurora's second-largest shareholder as strategic advisor

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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 firm’s second-largest shareholder.

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. Aurora’s shares gained 8.5 per cent to $11.54 as of 10:43 a.m. in Toronto.

“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 isn’t as antagonistic as some of the market may portray him to be and he collaborates closely with the company’s 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.”

Peltz, 76, has been granted 20 million options to purchase Aurora shares at $10.34 each, slightly below Tuesday’s 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.

While Singer acknowledged that the remuneration is “significant,” he said it’s 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.

Aurora, based in Edmonton, Alberta, hasn’t 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 isn’t 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, who’s chief evangelist officer at Invictus MD Strategies Corp. -- Peltz is arguably the highest-profile investor to take a job with a pot firm.

“It isn’t just about Nelson’s Rolodex, it’s 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 Wendy’s 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.

Trian, which Peltz co-founded in 2005, shuns the term activist investor, preferring to be known as a “highly engaged share owner.”Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.

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