Photographer: Taylor Weidman / Bloomberg
Photographer: Taylor Weidman / Bloomberg
Then a new giant will be created in the fast-growing cannabis industry Tilray Inc. i Aphria Inc. agreed to combine its operations.
The stock deal, which combines two of the industry’s best-known names, will create a new entity with a net worth of about A $ 4.8 billion ($ 3.8 billion), according to a statement and interviews with CEOs. Tilray and Aphria. Twelve-month annual sales of C $ 874 million from the combined companies exceed those of industry leaders, such as Curaleaf Holdings Inc. and Canopy Growth Corp.
The new company will be listed under Tilray’s ticker on the Nasdaq and Aphria’s shareholders will own 62% of Tilray’s shares on the terms of the transaction, which was characterized as a “reverse acquisition of Tilray.” Aphria will pay a 23% premium to Tilray’s Dec. 15 closing price of $ 7.87.
“I realized that Aphria needed to expand outside of Canada, and merging with Tilray was a great response because it’s a U.S.-based business with large international assets,” said Irwin Simon, Aphria’s chief executive officer. , who will be chairman and CEO group.
The agreement reinforces that cannabis, still considered by some to be a marginal investment, is a rapidly evolving sector as more U.S. states legalize the substance and open up a growing number of European countries. Until its medical use. The industry has seen a large number of bids as companies play by their position amid rapidly changing rules. The combined assets of Tilray and Aphria represent a first step toward this goal of creating a global cannabis operation.
Photographer: Galit Rodan / Bloomberg
Tilray CEO Brendan Kennedy will become a member of the combined company’s board. Kennedy and Simon first met in 2018, but the financial courtship only began this year. It was carried out by text messages and calls due to Covid-19 blockages that made face-to-face meetings difficult.
The new company will sell cannabis products across Canada and “will be well positioned to look for growth opportunities,” such as medical marijuana in Germany. The companies said Tilray’s Portugal production facilities will allow duty-free access to the European Union.
Simon and Kennedy said the deal puts them in a better position to take advantage of U.S. federal legalization and that it is also based on the prospect of greater legalization in Europe. Kennedy said Aphria’s two assets in Germany (a prescription distribution center and a culture center) were particularly attractive.
“We felt with this agreement, we could not only win in Canada, but win in Europe, ”he said.
Beverage assets
It will also result in a combination of beverage assets. Afria has agreed to acquire the American craft beer company Sweetwater Brewing Company, which makes cannabis-infused beverages, and Tilray is a partner of Anheuser-Busch InBev. Combined operations in the United States will focus on Sweetwater and Manitoba Harvest, which manufacture branded hemp and CBD products.
Simon said there is interest in using Tilray’s beverage plant in Canada to get Aphria to make drinks that contain THC, which is the active ingredient in cannabis.
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“The combined company is expected to have a strong and flexible balance sheet, cash balance and access to capital, which will allow it to accelerate growth and deliver attractive returns for shareholders,” according to a joint statement.
The companies claim that the bond, which requires shareholder approval by Tilray, will reduce annual costs by about C $ 100 million before taxes in the 24 months following completion. The agreement, which is expected to close in the second quarter of 2021, includes the right to match higher bids and a reciprocal termination fee of C $ 65 million in certain circumstances.
BNN Bloomberg Television earlier reported that Aphria and Tilray were in advanced conversations. Shares of the two companies rose at the end of trading on Tuesday, with Tilray jumping up 26% to $ 9.94 and Aphria rising 23% to $ 9.96. As of Tuesday’s close, Tilray shares have fallen 54% in 2020, while those in Aphria have risen 56%.
“Extended reach”
Bloomberg intelligence analysts Ken Shea and Gopal Srinivasan said in a the research notes that the combination “would offer several benefits,” including “a broader reach in international medical cannabis markets.”
The European market will grow to $ 359 million in 2020, 25% more than in 2019, according to Brightfield Group, a cannabis consulting firm. The United States remains the biggest prize, however. With its widespread recreational use, it is expected to account for 70% of the $ 93.8 billion global market by 2025, according to Euromonitor International.
Jefferies served as Aphria’s financier assessor, and Cowen was of Tilray assessor.