Merger will create biggest pot producer in Canada
TORONTO — Two of Canada’s largest medical marijuana firms are combining in a deal that will create a dominant domestic producer and reshape the fledgling industry.
Tweed Marijuana Inc. and Bedrocan Cannabis Corp. have agreed to merge, with an official announcement expected Wednesday morning. It is an all-stock acquisition by Tweed that values Bedrocan at about $58 million, or 84 cents a share, compared with its closing price of 66 cents Tuesday.
It is the first merger to occur in Canada’s medical marijuana space since the sector got off the ground last year and it is a game-changer. The combined company will be the industry’s undisputed leader, with more than 25 per cent of all the registered patients and production capacity in Canada. It will have three production facilities in Ontario and a total licensed sales capacity of about 6,000 kilograms of medical pot a year. The combined market is triple the size of its closest rivals.
This is the sort of transaction investors have been waiting for. When the federal government implemented new rules in April 2014 that required patients to buy medical marijuana from licensed producers, it triggered a frenzy as dozens of new entrants jumped into the business. Consolidation is viewed as essential to get the sector down to a handful of quality firms with broad product lines.
“Once you’ve delineated exactly who’s No. 1, I think a lot of the support will follow to that direction from patients and capital markets,” Tweed co-founder and chief executive Bruce Linton said.
Toronto-based Bedrocan and Smiths Falls, Ont.-based Tweed said their businesses are complementary. Tweed has a strong consumer focus and a lot of capital markets experience. Bedrocan, on the other hand, is all about science. The company’s Dutch licensor, Bedrocan BV, has been in the industry for decades and is recognized for producing standardized, high-quality products to treat a variety of illnesses.
The transaction is expected to close in August 2015.