Cannabis Companies Consolidate to Form Sector Giant

Tilray and Aphria Merge in Reverse Acquisition

Tilray (TLRY) and Aphria, two of the largest and best-known cannabis companies, plan to merge through an all-stock deal. The new company will be worth about $3.8 billion and will be known as Tilray.

The companies’ combined sales over the past 12 months total about $685 million. This puts the new entity ahead of big names in the cannabis industry like Curaleaf Holdings and Canopy Growth. Investors seem to see the tie-up as a win-win for Aphria and Tilray. Aphira shares rose 6.5% on the announcement, and Tilray shares gained 26%.

Expanding into the Beverage Industry

Both Tilray and Aphria have dipped their toes in the business of cannabis-related beverages. Aphria agreed to acquire Sweetwater Brewing Company, which produces beverages infused with cannabis. Tilray is a partner in Anheuser-Busch InBev (BUD).

In the United States the combined company will work with Sweetwater and Manitoba Harvest to produce hemp and CBD products. In Canada the company could leverage Tilray’s beverage facilities to start making THC-infused drinks.

Deal Foreshadows Future of Cannabis

While some still consider cannabis companies to be fringe investments, analysts expect the industry to grow widely around the world in the coming years. According to consulting firm Brightfield Group, the European market will expand by 25% in 2020 compared to the year prior. This would make the European market worth $359 million.

By 2025, analyst groups like Euromonitor International expect the United States to represent 70% of the world’s $93.8 billion market. As the market grows, consolidation is to be expected. Analysts predict that companies will merge strategically for access to the large American, Canadian, and European markets.

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