A blockbuster merger in the cannabis industry was announced Wednesday morning. Canadian peers Tilray (NASDAQ: TLRY) and Aphria (NASDAQ: APHA) combine to create the world’s largest marijuana company in terms of lagging 12-month, pro forma earnings.
The merger will take place by way of a transaction involving all shares. Shareholders of Aphria must obtain 0.8381 of one share of Tilray for each Aphria share they own; Tilray shareholders will not see any change in their holdings. After the transaction, current Aphria investors will own approximately 62% of the merged entity.
The merged company will keep the Tilray name, while the stock will keep the current ticker symbol. It will be led by Irwin Simon, CEO of Aphria, and seven of the nine seats on the new company’s board of directors will present Aphria’s directors. The other two directors come from Tilray, including that company’s CEO Brendan Kennedy.
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The two companies cited Simon’s comments on the deal:
We bring together two world-class companies that share a culture of innovation, brand development and cultivation to strengthen our Canadian, US and international scale, while pursuing opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital. .
While Aphria and Tilray are both usually at a loss, as one company, they will have above-average potential for the marijuana sector. The new company will own significant assets in every product category, from hemp to cannabis-infused beverages to traditional marijuana flower. It will also have a strong international presence vis-à-vis the competition, with operations in Portugal and Germany, among others.
Mid-afternoon trading on Wednesday, Tilray stock rose a robust 21.5%, well ahead of the gains of the S&P 500 index. Even Aphria – essentially the buyer in the deal – was on the rise, with a clip of 0.8%.