Nanaimo cannabis producer Tilray Inc. (Nasdaq:TLRY) today announced plans to merge with Leamington, Ontario-based competitor Aprhria Inc. (TSX:APHA; NYSE:APHA), to create the world’s largest cannabis company, ranked by sales, having sold $874 million worth of products during the last 12 months, according to the companies.
The combined venture will keep the Tilray name and trade on the Nasdaq under the TLRY symbol. The company sent a statement to BIV saying that it is "still considering whether to apply for a TSX listing for Tilray," after the transaction completes in what is expected to be the second quarter of 2021.
Nanaimo will remain as one of the company’s principal offices. Other main offices will be in New York, Seattle, Leamington and Toronto, the company said. Other global offices are expected to include sites in Germany and Portugal.
The all-stock transaction will see Aphria shareholders get 0.8381 shares of Tilray for each Aphria share they hold. Post-deal, Aphria shareholders will own about 62% of the Tilray shares.
Aphria’s CEO and chairman, Irwin Simon, is to take the same roles in the merged company, and is expected to split his time between the principal offices. Simon will take one of Aphria’s seven seats on the board of directors, while Tilray CEO Brendan Kennedy will take one of the two board seats reserved for selections from Tilray.
Becoming more efficient was one of the driving reasons for the deal, as the companies said that merging will provide $100 million in pre-tax annual cost savings.
The transaction will also allow Aphria to funnel more cannabis into Tilray's brands, thereby eliminating the need for Tilray to buy wholesale product from other licensed producers.
“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 a news 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.”
Tilray made waves on the Nasdaq when it went public on July 19, 2018, with a initial offering price of US$17.
By the end of that first day of trading, the company’s shares were up 31.7% to US$22.39.
Steady gains after that pushed the company’s shares to close on September 19, 2018, at US$214.06, which works out to be a 1,159% return in its first two months of trading. At the time it had a market capitalization more than US$19 billion.
Shares hit an intraday peak of US$300 – a value that was 1,664% more than the IPO price.
In recent days, Tilray’s share price was hovering in the US$7 to US$8 range. Its shares hit a high of US$10.01 on December 16, after the transaction was revealed, and was up 23.7% to US$9.73, late morning Vancouver time.
Aphria’s shares were up but gains were more muted, at a 2.65% gain to US$8.34 late morning Vancouver time.