Aphria (APHA) – Request report and Tilray (TLRY) – Request report, two giants in the cannabis industry, on Wednesday unveiled plans to join forces in an all-stock deal that will create the world’s largest marijuana manufacturing and distribution company.
Under the terms of the agreement, Aphria shareholders will receive 0.8381 Tilray shares for each Aphria ordinary share, a 23% premium to Tilray’s December 15 closing price of $ 7.87. The all-stock deal that will create a new powerhouse in the pot industry, with equity of approximately C $ 4.8 billion ($ 3.8 billion).
The combined entity’s annual revenue of C $ 874 million over 12 months exceeds current market leaders such as Curaleaf Holdings and Canopy Growth (CGC) – Request report, the companies said in a statement.
The new company will trade under Tilray’s ticker on the Nasdaq, and Aphria shareholders will own 62% of Tilray’s stock under the terms of the transaction, which was characterized as a “reverse takeover of Tilray,” Bloomberg said.
The deal comes as investors continue to take a blurry look at the cannabis space, which caused quite a stir when it was first legalized in Canada in October 2018, but has declined as sales of cannabis and cannabis-infused products failed to take off .
At the same time, as more US states legalize marijuana and an increasing number of European countries open up to medicinal use, industry players are looking to jump into the next, bigger phase of an industry still considered burgeoning.
For Aphria and Tilray, the deal positions the companies to take advantage of potential US federal legalization and the prospect of more legalization in Europe, Bloomberg said. Aphria’s two German assets – a prescription distribution center and cultivation facility – were particularly attractive.
The combined company will also be a leader in cannabis-infused beverages. Aphria has agreed to acquire American craft beer company Sweetwater Brewing, which makes cannabis-infused beverages, and Tilray is a partner of Anheuser-Busch InBev.
The combined US operations will focus on Sweetwater and Manitoba Harvest, which makes branded hemp and CBD products.
“The combined company is expected to have a strong, flexible balance sheet, cash balance and access to capital, giving it the opportunity to accelerate growth and deliver attractive returns for shareholders,” the companies said.
Shares of both companies rallied Wednesday in premarket trading, with Tilray shares rising nearly 21% to $ 9.52 in premarket trading and Aphria rising 11.82% to $ 9.08. Until Tuesday’s close, shares of Tilray are down 54% in 2020, while those of Aphria are up 56%.