Aphria and Tilray reportedly in advanced merger talks – Article

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Canadian cannabis producers Aphria Inc. and Tilray Inc. are in advanced talks to combine, with an announcement possible as early as this week, according to people familiar with the matter.

The merged company is expected to retain the Tilray name and name Aphria CEO Irwin Simon as CEO, the sources say. Aphria is likely to emerge with a majority of seats on the combined company’s board and with its shareholders holding a 60 percent stake, although that could change, added one of the sources with direct knowledge. of the question.

Tilray CEO Brendan Kennedy is reportedly in line for a seat on the board, but he is unlikely to retain a senior position, the source added.

Negotiations between the two companies were underway on Tuesday and there is no guarantee that a deal will be reached.

Representatives for Tilray and Aphria were not immediately available for comment.

Merged company Aphria-Tilray will likely move its headquarters to the United States as part of a strategy to strengthen its presence there, the sources said. Cannabis sales in the United States have increased dramatically over the past year amid rising marijuana use during the COVID-19 pandemic. Aphria is currently headquartered in Leamington, Ontario; Tilray is based in Nanaimo, British Columbia

The two companies envision up to $ 100 million in annualized cost savings by joining forces, while Aphria would produce the bulk of the combined entity’s Canadian cannabis inventory to fully utilize its 1 greenhouse. 3 million square feet in Leamington, Ontario, according to the sources. It is unclear what will happen to Tilray’s production facilities in Nanaimo, British Columbia and London, Ontario, but one of the sources with indirect knowledge said they would likely be shut down.

If Tilray and Aphria succeed in finalizing a deal, the deal would create the largest cannabis company in Canada and a major player in the global pot business. Tilray’s international operations, which include a world-class production facility in Portugal, are said to be one of the gems of the deal, the sources say. Tilray also has significant operations in Australia, Germany and the United Kingdom; meanwhile, Aphria has a German pharmaceutical distribution business.

The merged company would control a leading 19% share of the Canadian recreational cannabis market and annual revenues north of $ 930 million, based on the two companies’ most recent quarterly results along with the revenue generated by Sweetwater Brewing Co., which Aphria last acquired. month.

This is the second time in recent months that Aphria has reportedly intended to become a consolidator in Canada’s crowded cannabis industry. BNN Bloomberg reported in July that the pot giant based in Leamington, Ont., Was in serious negotiations with Aurora Cannabis Inc., but talks between the two companies collapsed due to differences over the composition of the board of directors and compensation.

One of the main differences between Aurora and Tilray is that the latter generates about half of its revenue from its hemp feed business Manitoba Health. This would likely appeal to Aphria given Simon’s previous role as the head of organic health food operator Hain Celestial Group Inc., and could add stable revenue to its non-cannabis subsidiaries, such as the German company of pharmaceutical distribution CC Pharma and Sweetwater Brewing.

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