Under the deal, Alberta-based Aurora will acquire a 19.9 per cent stake in the company for $103.5 million through a non-brokered private placement.
It will also have an ability to increase its interest in Liquor Stores up to 40 per cent with an additional investment.
Liquor Stores plans to use the money to establish and launch a brand of cannabis retail outlets.
The retailer says it will convert some of its existing stores into cannabis outlets and establish new locations.
Liquor Stores will also use a portion of the money to strengthen its existing liquor retail brands by renovating its existing outlets and for general corporate purposes.
WATCH: The City of Edmonton is looking to see if liquor rules need to be updated, particularly when it comes to the distance between them. Vinesh Pratap looks at what’s driving the debate. (Aired Jan. 16, 2018.)
Edmonton-based Liquor Stores operates 231 retail liquor stores in Alberta, B.C. and Alaska under several brands, including Liquor Depot, Wine and Beyond, and Liquor Barn.
In December, the company said it hired one of its directors to map out its future cannabis strategy as Canada moves to make recreational pot legal by July.
Liquor Stores said James Burns will act as vice-chairman and be the lead executive for business transformation and investor relations. He was appointed to the board in June 2017.
The company previously indicated it was interested in retailing marijuana in Alberta and B.C. but was awaiting regulatory clarity before deciding if it would be profitable to do so.
Most of its liquor stores are in Alberta, where the provincial government said it plans to control the online sale of pot, but will leave over-the-counter sales to private operators.
Details on how sales would work have yet to be determined. Private pot stores would have to be physically separate from stores that sell alcohol, tobacco or pharmaceuticals, but how that would be legally defined is also undetermined. Stores would not be allowed to sell anything but cannabis and cannabis-related products.
B.C. has said it will allow both public and private retail outlets. Both provinces have indicated details on licensing will come early this year.
Last month, Aurora Cannabis reached a friendly billion-dollar deal to buy rival licensed producer CanniMed Therapeutics, making it the biggest acquisition the marijuana sector has seen to date.
The agreement, valued around $1.1 billion, comes after an acrimonious takeover battle that included a public war of words and a lawsuit filed by CanniMed against its suitor.
The Canadian government plans to legalize marijuana on July 1.
— With files from Karen Bartko, Global News