Canada’s Tilray and Aphria finalized a merger that will create the world’s largest marijuana company in terms of revenue.
Under the agreement, Aphria, the larger of the two companies, will pay a 23 percent premium to Tilray’s $7.87 closing price of December 15 and its shareholders will now own 62 percent of Tilray’s stock. The merger is anticipated to yield pretax cost-savings of up to $81 million within the first year and a half of operations.
The combined company, which will continue under the name Tilray, holds $3.9 billion in equity and has generated $685 million in revenue in the past 12 months. It now controls around a fifth of Canada’s recreational marijuana market. Following news of the announcement, Tilray shares were up almost 30 percent in premarket trading on the Nasdaq.
Aphria’s former CEO and chairman, Irwin D Simon, will head up the new Tilray, while Tilray’s former CEO Brendan Kennedy will join the board.
“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,” said Simon in a press release.
Shareholders hope the merger will establish Tilray as an “unrivaled European platform” for marijuana production and distribution across the Atlantic. Tilray already runs a 2.7 million square foot medical marijuana cultivation site in Portugal which allows for tariff-free access to the European Union’s single market, while Aphria has a medical cannabis distributor in Germany, as well as Australia and the UK.
The merged company also looks to further establish itself in the US with a new headquarters in order to capitalize on expected growing demand. Cannabis sales across the US increased in lockdown and more and more states are taking steps to legalize marijuana even though it remains illegal under federal law. Illinois, for one, expects its marijuana sales to top $1 billion in only its second year of operation, while New York recently moved to legalize cannabis sales and could soon become the country’s largest legal cannabis market.