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Medicinal cannabis company Cann Group Ltd rockets on takeover speculation

The best performer on the All Ordinaries on Monday has been the Cann Group Ltd (ASX: CAN) share price.

At the time of writing the medicinal cannabis company’s shares are up a whopping 18% to $3.54.

Why are Cann Group’s shares rocketing higher today?

Cann Group’s shares are on fire today because of speculation that it is a takeover target for its strategic partner Aurora Cannabis which currently owns a 22.9% stake in the company.

According to the AFR, the C$4.3 billion cannabis giant is rumoured to be interested in acquiring Cann Group for a sizeable $4.50 per share, valuing it at approximately $500 million.

Considering Cann’s sizeable production facilities, changes in regulations to allow medicinal cannabis exports, and its existing stake, I can’t say I’m overly surprised by the speculation.

However, it is worth noting that Cann Group has put out a response this morning that acknowledges the speculation but denies that a formal approach has been made.

It did admit that preliminary discussions had been made, stating that Cann Group: “has recently had very preliminary and confidential discussions with Aurora in relation to a potential transaction. However, there is no certainty that any formal offer or transaction will eventuate.”

Before adding that it: “will properly consider any offer or proposal it may receive having regard to all the alternatives available to the company.”

As you might imagine, this news has sent the shares of fellow medicinal cannabis companies surging higher.

At the time of writing the Auscann Group Holdings Ltd (ASX: AC8) share price is 5% higher to $1.76, Creso Pharma Ltd (ASX: CPH) is 3% higher, MMJ Phytotech Ltd (ASX: MMJ) is up 4%, and Hydroponics Company Ltd (ASX: THC) shares are up a sizeable 7%.

AusCann would be the next likeliest company to receive a takeover approach in my opinion. Especially given its strong management team, licence advantage, and strategic partnership with C$5.4 billion cannabis giant Canopy Growth Corp, which owns a sizeable stake in AusCann.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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