Shot of marijuana growing inside of a grow room. Credit: Marco VDM / Getty Images
January 8, 2021
After a bitter proxy battle, Aurora Cannabis founder and former president Terry Booth has been tapped as CEO of Australis Capital (AUSA), a cannabis investment firm once owned by the Edmonton producer. He's wasted no time in executing on a strategy to move Australis along its path toward being a plant-touching multistate operator.
"We anticipate that this transaction, upon its completion, will be game-changing and immediately accretive, and marks the first and crucial step in the transformation of AUSA to become the Company it was always meant to be: a profitable and rapidly growing MSO," Australis interim CEO Duke Fu said in a statement.
Booth's appointment came as part of a deal to acquire a 51 percent stake in ALPS, formerly Aurora Larssen Projects, a horticultural facility design, construction, and management company once owned by Aurora Cannabis. Australis Capital itself spun off from Aurora in September 2018 and subsequently listed on the Canadian Securities Exchange in order to legally invest in U.S. cannabis assets.
If the ex-CEO of Aurora taking charge of a former Aurora subsidiary just as it acquires a property once owned by the Edmonton-based cannabis producer sounds like déjà vu, Booth insists it isn't. ALPS's greenhouse technology will, however, play a decisive role in Australis' business model.
"What we've come up with as far as the strategy and vision for Australis is not an Aurora 2.0 or anything like that. There's going to be a low [capital expenditure] model; we're not going to go and build a bunch of facilities for ourselves, but we are going to build facilities; and we're going to do that through the acquisition of … ALPS," Booth said.
Booth envisions using ALPS' expertise, which extends beyond just cannabis greenhouses, to build out cultivation facilities for bigger U.S. cannabis operators. As part of the agreement, a small percentage of those facilities will be dedicated to growing Australis cultivars, permitting the company to produce low cost cannabis.
"Getting a high quality, inexpensive biomass is key," Booth said.
The arrangement, he said, will permit Australis to invest in branding and advertising, and piggyback off of the licenses of their partners in various markets. A press release announcing the transaction notes 2020 revenue for ALPS was hit by the COVID-19 pandemic and business development restrictions under "previous ownership," but that the company has projects worth $2.5 billion in its pipeline.
Shortly before the Booth and ALPS announcement, Australis announced another acquisition of Nevada-based cannabis company Green Therapeutics, which had previously sued Australis. Green Therapeutics was founded by Australis' interim CEO and former MedMen President Duke Fu, but the companies said he recused himself from negotiations. The transaction, worth about $7.8 million, grants Australis access to the company's brands, a manufacturing license in Oklahoma, interest in a Missouri extraction and processing license, as well as the company's management team.
"We're going to bring in an excellent management team, not only from [Green] Therapeutics, but also from ALPS, and getting us prepared to actually be a real deal in the States right now," Booth said.
Booth's appointment as CEO of Australis follows a proxy battle in the fall, which resulted in the ouster of four senior Australis executives including former CEO Harry DeMott in November, Yahoo Finance reported. A group of dissident shareholders, calling themselves "Concerned Shareholders of Australis Capital," went public in July with allegations that Australis leadership lacked direction and misled investors, among other things. Booth publicly aligned with the group in August, according to Yahoo Finance.
"They wanted to pivot the company to a FinTech company. I didn't agree with that and made my voice known," Booth told Cheddar.
DeMott penned a scorching letter to shareholders in October, criticizing the dissident shareholders' as "cronies" of Booth, poking holes in their plan, and calling out Booth for his history at Aurora. He also predicted Booth might take over as CEO in the event the group gained control
"Shareholders ignore the man behind the curtain at their own peril," DeMott wrote.
Ultimately, an overwhelming number of Australis shareholders sided with the dissidents, handing control of Australis to Booth and his allies.
"I think these announcements ... and, you know, future announcements over the next six months are really going to show our shareholders that they made the right decision," Booth said.
Booth co-founded Aurora Cannabis and served as its CEO for seven years. Under his guidance, the company grew from a small medical marijuana producer to a global cannabis giant. But Aurora began to struggle amid challenging market conditions and a slower than expected rollout of adult-use in Canada. Booth stepped down as CEO in February 2020, after the company announced 500 layoffs and almost $1 billion in writedowns.