Canadian cannabis companies Aphria and Tilray announced plans to merge
Canadian cannabis companies Aphria and Tilray on Wednesday announced plans to merge, a transaction that would create a giant international marijuana firm with combined equity value of approximately 5 billion Canadian dollars ($3.9 billion).
The merged company would be the “world’s largest global cannabis company” based on pro forma revenue of CA$874 million over the past 12 months, the companies said in a joint news release.
Under the merger, the combined company would operate under the Tilray name, with head offices in the United States, Canada, Portugal and Germany.
In addition to competing in Canada’s recreational marijuana market, Aphria and Tilray said the new company would be “well-positioned” to pursue European growth opportunities, building on Aphria’s German assets and Tilray’s Portugal production facility.
The companies also highlighted their consumer packaged goods infrastructure in the U.S., including Aphria’s recently acquired craft brewer SweetWater Brewing Co. and Tilray’s Manitoba Harvest hemp foods business.
“The combined company is expected to have a strong, flexible balance sheet, cash balance and access to capital, giving it the ability to accelerate growth and deliver attractive returns for stockholders,” Tilray and Aphria in the release.
Under the deal, structured as a reverse acquisition of Tilray, each Aphria shareholder would receive 0.8381 Tilray shares for each Aphria share held, meaning Aphria shareholders would own roughly 62% of outstanding Tilray shares.
That represents a 23% premium over Tilray’s share price at market close on Tuesday.
The combined firm would be led by Aphria CEO Irwin Simon and a nine-person board of directors – seven directors from Aphria, including Simon, and two from Tilray, including Tilray CEO Brendan Kennedy.
Cost-saving synergies from the combination would total approximately CA$100 million within 24 months, the companies said.
Management commentary During a Wednesday morning conference call and investor presentation, Aphria and Tilray executives said the merger is expected to close in the second quarter of 2021, subject to approvals from shareholders, regulators and courts.
Simon said he aims to capture at least 30% market share in Canada.
He also articulated a bullish outlook for the combined company’s European operations, saying he sees “a good chance” for recreational legalization in Germany and Portugal in 2021. Germany rejected a recreational legalization bill in October.
As for the company’s U.S. plans, Simon noted that the combined company still won’t be able to operate there in a plant-touching capacity.
“But when (U.S.) legalization does happen,” he said, “when we have the best in class in Canada, the best in class in Europe … and having a business in the U.S. market, being domiciled in the U.S. market – the opportunity to buy something, to create something, will be at our fingertips to go ahead and do it.”
Kennedy said he believes it’s “extremely likely” that every European Union country will legalize medical marijuana in the next two years, particularly in light of a recent United Nations vote to reschedule cannabis.
“There are tremendous opportunities for growth, not only in the existing European market but in in new markets, medically, such as France,” he said.
“I think that is going to lead to more conversations around adult-use legalization in Europe, occurring not only in 2021, but in the following years.”