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Report on Business Cannabis Professional Tues, Sept. 10: Aurora closes on a series of loan arrangements; California bill stalls; BMO upgrade Sundial rating; Zenabis to ship to Ontario

Cannabis Professional’s daily roundup of industry news. View archive here.

Aurora Cannabis has closed on a series of loan arrangements with the Bank of Montreal and other lenders worth up $360-million. A bill in California intended make it easier for the cannabis industry to access banking services in the state will not be voted on this year, the Associated Press reports. Bank of Montreal analysts have upgraded their rating for Sundial Growers, although kept the same price target. Meanwhile, Zenabis has signed an agreement with the Ontario Cannabis Retail Corp. and will start shipping product to Ontario, and MedMen is one step closer to closing on its proposed acquisition of PharmaCann following the expiry of a waiting period mandated under U.S. anti-trust law. Valens GroWorks released revenue guidance on Tuesday, saying that it expects to report between $16-million and $17-million worth of sales in its most recent quarter.

– Mark Rendell

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Aurora Cannabis closes on $360-million worth of loans

Aurora Cannabis Inc. said on Monday that it has closed on a set of loans totaling $360-million with a syndicate lenders led by the Bank of Montreal.

“The facilities consist of an additional $160-million in term loans, as well as an accordion feature that enables Aurora to upsize the facility by approximately $40-million, in addition to the original $200-million in credit facilities all of which mature in 2021,” the company said.

Aurora reports its fourth quarter and fiscal year end results after market on Wednesday.

– Mark Rendell

California bill to create banks for marijuana money stalls

A bill to let California create special banks to handle cash from the fledgling recreational marijuana industry will not pass this year.

California is the nation's largest legal marijuana market. But marijuana is still illegal under federal law, and banks have been unwilling to accept deposits from licensed pot businesses.

California Democratic state Sen. Bob Hertzberg authored a bill this year that would have let the state charter special banks to handle money from state-licensed marijuana businesses. Hertzberg announced Monday the bill would not get a vote this year. He said if California is going to do this, "we have to do it right."

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Hertzberg said he will work with Gov. Gavin Newsom and state Treasurer Fiona Ma to pass the bill next year.

– Associated Press

Bank of Montreal analysts upgrade Sundial rating

Bank of Montreal analysts Tamy Chen and Peter Sklar upgraded their rating for Sundial Growers Inc. to Outperform (Speculative) from Market Perform (Speculative) while keeping their price target at $12.

“At the current share price, the company’s valuation implies 2020 revenues of $220mm (assuming a 3x multiple) vs. our forecast of $490mm. While we believe there remains execution uncertainty in the industry, we believe Sundial shares are now reflecting an overly cautious revenue outlook in the context of the company’s results to date,” wrote Ms. Chen and Mr. Sklar in a note on Monday.

“We note that following Q2/19 results, the company’s annualized revenue run-rate is $80mm. In addition, we note that Sundial only recently began to sell into the rec channel,” they wrote.

Sundial shares have performed poorly since the company went public on the Nasdaq Exchange in August. The company went public at US$13 and dropped 35 per cent in its first day of trading.

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Sundial has also been hit by reports of operational difficulties. Market Watch reported that Zenabis Global Inc. returned a batch of wholesale cannabis worth an estimated $2.5-million to Sundial “because it contained visible mold, parts of rubber gloves and other non-cannabis material.”

Sundial responded to the allegations in a filing to the SEC which said “there were factual inaccuracies in the article” and called the situation an “isolated immaterial matter.”

- Mark Rendell

Zenabis to start shipping to Ontario

Zenabis Global Inc. said on Tuesday that it has signed a supply agreement with the Ontario Cannabis Retail Corporation.

“Zenabis will begin supplying OCS with 21 distinct, adult-use cannabis products under its premium Namaste and Blazery brands, in the third quarter of 2019,” the company said.

The company already ships to eight other provinces and to Yukon.

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- Mark Rendell

MedMen one step closer to closing PharmaCann acquisition after waiting period expires

MedMen Enterprises Inc. said on Tuesday that it is one step closer to closing its proposed acquisition of PharmaCann, LLC, following the expiry of a waiting period mandated under U.S. anti-trust law.

“The expiration of the waiting period under the HSR Act satisfies one condition needed to close the Transaction, which is expected to be completed by the end of calendar year 2019, subject to customary closing conditions,” the company said.

MedMen made an all-share bid for PharmaCann in December 2018, but the closure of the deal has been slowed by requests from the U.S. Department of Justice Antitrust Division. In August both companies said that they were “substantial compliance” with requests from the department.

- Mark Rendell

Valens puts out quarterly revenue guidance of between $16-million and $17-million

Extraction firm Valens GroWorks Corp. said on Tuesday that it expects to report between $16-million and $17-million in revenue from its recently ended third quarter. Valens based the revenue guidance on extraction volumes; the company said it processed over 26,000 kilograms of cannabis and hemp in the quarter.

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“This represents a significant ramp in extraction volumes compared with the 8,547 kilograms of dried cannabis and hemp biomass it processed in the second quarter of 2019, driven by the build out of the Company’s ethanol extraction capabilities and increasing volumes from our new and existing customers,” the company said in a news release.

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