Just two weeks after closing on the acquisition of Atlanta’s Sweetwater Brewing Company, Canadian cannabis company Aphria has reached an agreement to merge with Tilray, forming the world’s largest cannabis company valued at $3.8 billion.
BNN Bloomberg first reported on the rumored deal Tuesday evening.
The agreed upon combination still must receive approval of at least two-thirds of Aphria shareholders, as well as a majority of Tilray stockholders. At the close of the deal, Aphria will become a wholly-owned subsidiary of Tilray, with Aphria shareholders owning 62% of the company in what is described as “a reverse acquisition of Tilray.”
The transaction — also subject to regulatory and court approvals — is expected to close in the second quarter of 2021.
The deal represents a 23% premium based upon Tilray’s stock price at the closing of trading on the NASDAQ on December 15.
According to a joint press release, the combined company would have posted revenue of $685 million on a pro forma basis for the last 12-month period. In Canada, where the adult-use retail market is valued at $2.4 billion, the company’s gross revenue would have totaled $232 million for the last 12 months. (All dollar figures are in U.S. dollars.) Aphria and Tilray’s product portfolio includes f flower, pre-roll, oils, capsules, vapes, edibles and beverages.
Between August and October 2020, the combined company would have held 17.3% of the retail market share in Canada, the largest of any single licensed producer in the country.
Once completed, Aphria chairman and CEO Irwin D. Simon will lead the company as chairman and CEO. The company will also have a nine member board of directors, with seven directors from Aphria and two from Tilray, including current Tilray CEO Brendan Kennedy.
“This is an exciting day for both companies including our 2,500 employees, for the cannabis industry, and for patients and consumers around the world,” Simon said in the release. “We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S., and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital.”
In the U.S., Aphria and Tilray say between Sweetwater, with its embrace of the cannabis lifestyle via 420 Extra Pale Ale and other brands, and Manitoba Harvest, which manufactures hemp foods and offers CBD and wellness products, the company will have a “strong consumer packaged goods presence and infrastructure,” as well as be well-positioned for federal legalization in the U.S.
“The Combined Company is expected to leverage Sweetwater’s craft beer manufacturing and distribution network to build brand awareness for the Combined Company’s leading brands via craft beers, hard seltzers, and other beverages as it seeks to take advantage of opportunities for both the adult-use and health and wellbeing beverage trends,” the company said in the release.
Additionally, the two companies said they will leverage their distribution networks in Canada to sell Sweetwater’s flagship 420 Extra Pale Ale.
In November, Aphria struck a deal to acquire the Atlanta craft brewery for $300 million in cash and stock.
The merger of Aphria and Tilray adds an interesting wrinkle to the Sweetwater acquisition, closing the degrees of separation between the craft brewer and the world’s largest beer manufacturer. In December 2018, Tilray and Anheuser-Busch InBev announced a joint venture called Fluent to research non-alcoholic beverages infused with THC and CBD. At the time, both companies said they would invest up to $50 million to gain a better understanding of the cannabis infused beverage market, with the arrangement limited to the Canadian market.
Under the terms of that partnership, A-B subsidiary Labatt Breweries of Canada forged a partnership with Tilray subsidiary High Park Company, an adult-use cannabis company that makes, sells and distributes cannabis brands in Canada.
Aphria and Tilray said they will leverage Fluent to “enhance production of non-alcohol cannabis beverages under the Everie brand with its CBD teas and sparkling beverages as well as further develop its existing research partnership with A-B InBev and Labatt for future product and brand innovation.”
According to THCNet, Simon told investors and analysts that he is “really excited” about the prospect of Sweetwater and A-B working together to create cannabis drinks.
“I think there is a great opportunity to work with them,” he said.
Outside of the U.S., Aphria and Tilray will look for growth with medicinal cannabis in Germany and low-cost cannabis production in Portugal.
The combined company will maintain offices in the U.S. (New York and Seattle), Canada (Toronto, Leamington and Vancouver), Portugal and Germany.
Jefferies LLC served as a financial advisor to Aphria, while Cowen represented Tilray.