TORONTO - Newstrike Resources Ltd. has confirmed that it has entered an exclusivity agreement with CanniMed about potentially combining the two businesses.

The Tragically Hip-backed company (HIP.V) says it will continue to negotiate the proposed deal, which would see Newstrike shareholders receive 3.3 CanniMed shares for every 100 they hold in Newstrike.

News of the proposed deal surfaced after Aurora Cannabis Inc. (ACB.TO) made an unsolicited takeover offer for CanniMed late Tuesday, giving the company a Friday deadline to decide.

CanniMed (CMED.TO) responded coldly to the all-share offer, saying it inflated Aurora's value and urged shareholders not to tender their shares until the board has time to consider the offer.

Aurora said the all-share deal could be worth up to $24 a share for CanniMed shareholders and that it already has support from shareholders representing 38 per cent of CanniMed's outstanding shares.

Newstrike's share price was down about $0.10 or 16.4 per cent to $0.49 in midday trading on the TSX Venture. CanniMed's share price was down $1.08 or 5.5 per cent to $18.72 on the TSX on a down day for cannabis stocks generally.