Marijuana producers Tilray and Aphria announced plans to merge Wednesday in a deal that will create a $4 billion cannabis colossus.
The combined company will boast $685 million in annual revenue, making it the world’s biggest player in a fast-growing industry, the Canadian firms said.
Aphria called the all-stock tie-up a “reverse acquisition” of Tilray in which Aphria’s shareholders will end up holding about 62 percent of the stock in the new company, which will operate under Tilray’s name and trade under its ticker symbol on the Nasdaq.
“We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, US, and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital,” said Aphria CEO Irwin Simon, who will serve as chairman and chief executive of the combined firm.
Both companies’ stock prices soared on the news — Tilray shares climbed as much as 26 percent to $9.95 in early trading while Aphria’s jumped as much as 6.5 percent to $8.65.
Shares in rival pot companies tumbled, with Canopy Growth Corporation dropping as much as 2.6 percent to $26.06 while Aurora Cannabis slid 4.2 percent to $9.78.
The new Tilray, valued at about $3.9 billion, will be the leading licensed cannabis producer in Canada — home to a $2.4 billion market for legal weed — with an expansive portfolio of products including marijuana flower, oils, edibles and pre-rolled joints, among other items, according to a news release.
The firm will also look to expand Aphria’s existing footprint in the budding medical marijuana market in Germany and other European countries, the companies said.
And it will have a foothold in the US, where a growing number of states are legalizing cannabis for recreational use. Its American portfolio will include SweetWater Brewing Company, which sells weed-inspired craft beers, and Manitoba Harvest, a purveyor of hemp and CBD products.
Aphria is also interested in using Tilray’s Canadian beverage facility to produce drinks laced with THC, the psychoactive ingredient in marijuana, according to Bloomberg News, which first reported on the deal.
Tilray and Aphria say the deal will achieve pre-tax cost savings of 100 million Canadian dollars, or roughly $78 million, within two years after it’s complete. The deal is expected to close in the second quarter of next year.
Tilray was previously owned by Privateer Holdings, a cannabis-focused private equity fund reportedly backed by Silicon Valley tycoon Peter Thiel. Privateer agreed to gradually release its majority stake in Tilray under a deal the companies closed in December 2019.