Cannabis producers Tilray and Aphria surged sharply amid reports of their merger talks. If the deal goes through, 60% of the shares of the combined company will belong to the shareholders of Aphria, and its gene. the director will head the new company.
Tilray (TLRY) and Aphria (APHA) rose 6.8% and 3%, respectively, on Tuesday, following news of a potential merger on Wednesday, Bloomberg reported, citing sources familiar with the negotiations. The companies have not yet officially confirmed this claim.
Tilray and Aphria are the largest Canadian cannabis growers actively expanding their businesses to international markets. Aphria’s market cap (as of Tuesday’s close of trading) was $ 2.35 billion, while Tilray’s market value is estimated at $ 1.09 billion.
The companies are hoping to save up to $ 78.7 million (C $ 100 million) in annual costs as a result of the merger, sources said, while increasing their total annual revenues to over $ 732 million (C $ 930 million).
The combined company will likely use the name Tilray, but will be led by current Aphria CEO Irwin Simon. Tilray CEO Brendan Kennedy may take a seat on the new company’s board of directors, but is unlikely to retain any leadership position.
Earlier this year, the media reported that Aphria was in merger negotiations with Aurora Cannabis (ACB), but they did not end with the signing of the deal.
The joining forces will give Tilray and Aphria a greater market share and better compete with the leader, the large Canopy Growth (CGC).
Since the beginning of the year, Canopy Growth is up 26.8%, Aphria is up 55.6%, while Tilray is down 54%.
Cannabis growers rallied in shares as investors expect US cannabis legalization could happen faster. All cannabis stocks have seen strong gains throughout the last quarter as the United States is the largest market and the legalization of medical and recreational cannabis in the United States may be followed by similar moves by other governments.
According to Bloomberg, Tilray and Aphria are planning to move their headquarters from Canada to the United States.
President-elect Biden and Vice President Kamala Harris advocate federal decriminalization of cannabis. In addition, the legalization of medical and recreational cannabis was approved by voters in all five states, where the issues appeared on the ballot papers in November.
This month, the US House of Representatives voted in favor of a bill that would remove cannabis from the list of controlled substances, but must pass in the Senate to be ratified.