Aphria and Tilray Join Forces in Cannabis-Infused Mega Merger

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Cheech and Chong would be mighty proud.

Aphria (APHA) - Get Report and Tilray (TLRY) - Get Report, two giants in the cannabis industry, on Wednesday revealed plans to join forces in an all-stock deal that will create the world’s biggest marijuana production and distribution company.

Under terms of the agreement, Aphria shareholders will receive 0.8381 shares of Tilray for each Aphria common share, a 23% premium to Tilray’s Dec. 15 closing price of $7.87. The all-stock deal that will create a new powerhouse in the pot industry, with an equity value of about C$4.8 billion ($3.8 billion).

The combined entity’s 12-month annual sales of C$874 million are larger than current industry leaders such as Curaleaf Holdings and Canopy Growth (CGC) - Get 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 acquisition of Tilray,” the companies said.

For Aphria and Tilray, the deal positions the companies to take advantage of potential U.S. federal legalization as well as the prospect of more legalization in Europe, according to Bloomberg. Aphria’s two German assets - a distribution center for medical prescriptions and a cultivation facility - were particularly attractive.

The combined company also will be a leader in cannabis-infused drinks. Aphria has agreed to acquire U.S. craft beer company Sweetwater Brewing, which makes cannabis-infused beverages, and Tilray is a partner of Anheuser-Busch InBev.

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