Auxly Turns Lost Bid for Ayurcann into a Calculated Financial Victory

TORONTO, ON – April 13, 2026 – In a move that underscores the strategic financial maneuvering required to thrive in Canada's turbulent cannabis sector, Auxly Cannabis Group Inc. announced today that its stalking horse bid for the assets of the insolvent Ayurcann Holdings Corp. was not selected as the winning offer. However, a closer look at the deal reveals a masterclass in opportunistic investment, positioning Auxly to profit regardless of the outcome.

While rival Red White & Bloom Brands Inc. emerged as the successful bidder, Auxly secured the position of 'Back-Up Bid' and is set to reap considerable financial rewards from its role as a creditor. The arrangement highlights a disciplined capital strategy that prioritizes shareholder returns, even when an acquisition target slips away.

The Art of the Backup Bid

Auxly's involvement with Ayurcann began before the final bidding process. The company provided Ayurcann with crucial debtor-in-possession (DIP) financing, a loan extended to companies under creditor protection. This non-revolving facility, amounting to $2.0 million, was not merely an act of goodwill; it was a secured, high-yield investment.

The terms of the DIP facility are highly favorable to Auxly. It carries a 12% annual interest rate and included a 2.0% upfront commitment fee, which translates to an immediate $40,000 return. Crucially, the loan is protected by a Court-ordered super-priority charge, placing Auxly at the front of the line for repayment over all of Ayurcann's property.

With Red White & Bloom's subsidiary, Emblem Cannabis Corporation, now selected as the successful bidder, the terms of the sale process dictate that they must repay Auxly's $2.0 million DIP loan in full, along with all accrued interest. Furthermore, Auxly will receive a "Break Fee" and an "Expense Reimbursement," both standard protections for a stalking horse bidder that compensate them for the time and resources spent conducting due diligence. While the exact figures for these fees are not public, they ensure Auxly walks away with a profitable return on its short-term investment.

Should the successful bid from Red White & Bloom fail to close by the May 15, 2026 deadline for any reason, Auxly’s original stalking horse bid automatically becomes the winning one. This backup position provides Auxly with a second chance to acquire the assets at a predetermined price, effectively giving the company two potential paths to a positive outcome.

A Casualty of Consolidation

The auction of Ayurcann's assets is a stark illustration of the intense financial pressures plaguing the Canadian cannabis industry. Ayurcann, once a notable player with leading positions in the popular vape and pre-roll categories, filed for creditor protection under the Companies' Creditors Arrangement Act (CCAA) on January 30, 2026.

The company's downfall was not due to a lack of market presence—its products were in over 2,500 stores—but a severe liquidity crisis driven by a staggering $10.6 million in unpaid federal excise taxes owed to the Canada Revenue Agency (CRA). A new, aggressive payment plan imposed by the CRA proved to be the final blow, demanding monthly payments that far exceeded the company's available cash. This situation is not unique to Ayurcann; unpaid excise taxes have become a systemic issue, contributing to a wave of insolvencies and bankruptcies across the sector.

Despite its financial woes, Ayurcann's operational assets remained attractive. The company had a modern processing and manufacturing platform and a portfolio of established brands like Fuego and Xplor. This made it a prime target for larger, more financially stable companies looking to acquire market share and production capacity at a discount, fueling the industry's ongoing consolidation.

Auxly's Dual-Track Strategy

For Auxly, the Ayurcann situation was a test of its evolving corporate strategy, which balances aggressive organic growth with disciplined, opportunistic acquisitions. Hugo Alves, CEO of Auxly, framed the bid in precisely these terms.

"Our stalking horse bid for Ayurcann was opportunistic in nature and contingent on exceeding our internal return thresholds," Alves stated in a press release. He emphasized that the company will continue to pursue non-organic growth where there is a "strong strategic fit," but that the immediate focus remains on internal growth.

This focus is well-founded. Auxly has successfully carved out a dominant position in the Canadian market, driven by its flagship brand, Back Forty, which was the top-selling cannabis brand in the country throughout 2025. The company reported impressive financial results for 2025, with net revenues climbing 24% year-over-year to $151.5 million and adjusted EBITDA soaring 64% to $43.8 million.

This strong performance is generating substantial cash flow, which the company projects will increase significantly in 2026. Auxly plans to reinvest between $10 million and $12 million of this operating cash flow into enhancing production capabilities and preparing for international exports, signaling confidence in its core business.

By not overextending itself for the Ayurcann assets, Auxly demonstrated a commitment to financial prudence. The company avoided a potentially costly bidding war and instead leveraged its capital to secure a guaranteed, low-risk return. This move allows Auxly to preserve its $32 million cash position for future opportunities that better meet its strict internal criteria, all while continuing to power its formidable organic growth engine.