Aurora Cannabis (NYSE:ACB) is making a long-awaited move into the largest legal cannabis market in the world. The marijuana producer announced on Wednesday that it has entered into an agreement to acquire Reliva, one of the best-selling retail cannabidiol (CBD) brands in the U.S. 

Cannabidiol is one of the many compounds found in cannabis plants. Unlike marijuana, which tends to contain high levels of tetrahydrocannabinol (THC), CBD doesn't intoxicate users. Instead, a growing number of people in the U.S. and around the world use CBD products for their reported health benefits. In turn, retail CBD sales could grow to as much as $24 billion by 2025 in the U.S. alone, according to the Brightfield Group, a cannabis market researcher.

Reliva is a leading seller of hemp-derived CBD products in the U.S. Its products can be found in more than 20,000 retail stores across the country.

A U.S. style flag with the stars replaced by a cannabis leaf

Aurora Cannabis is claiming its share of the U.S.CBD market by acquiring Reliva. U.S. Image source: Getty Images.

As part of the all-share transaction, Reliva members will receive $40 million worth of Aurora's common stock. The deal also includes a potential earn-out of up to $45 million in additional Aurora shares, cash, or a combination of the two. Those funds will be paid out if Reliva is able to hit certain financial targets over the next two years. In this way, the earn-out is intended to reduce risk for Aurora's investors and incentivize Reliva's management to create value for the combined company.

The deal is expected to close in June, pending regulatory and shareholder approval.

Mo' CBD, mo' profits 

Aurora says the acquisition will be immediately accretive on an adjusted EBITDA basis, which would help it hit its goal of achieving adjusted EBITDA profitability by the first quarter of fiscal 2021.

"Together, Aurora and Reliva will partner to create an international cannabinoid leader that we believe can deliver robust revenue and profitable growth," Aurora interim CEO Michael Singer said in a press release. "We have taken the time necessary to carefully assess the company's entry into the U.S. market and we firmly believe that the combination with Reliva will create significant long-term value, as Reliva provides us options to grow in hemp-derived CBD internationally."

Investors apparently agree. Aurora's stock surged by 30% in after-hours trading on Wednesday after news of the deal broke.