Analyst calls merger of two cannabis giants `good news' for Leamington
Aphria will lose its name in a huge merger between two of Canada's pot giants that will result in the world's biggest cannabis company.
Leamington-based Aphria Inc. and Nanaimo, B.c.-based Tilray Inc. said Wednesday they are joining their businesses in the new year to create a $4.8-billion enterprise that will continue under the name Tilray and trade on the American Nasdaq Stock Market.
While being described as a merger, “make no mistake, this is an acquisition by Aphria,” said Craig Wiggins, a Tecumseh-based industry analyst and managing director of The Cannalysts Inc.
Seven of the nine directors on a new board will be coming from Aphria, and the new company will be headed by Aphria CEO and board chairman Irwin Simon. The all-stock deal, expected to close in the second quarter of 2021, will see Aphria shareholders own 62 per cent of Tilray stock.
Despite the local name loss, Wiggins said that, “locally, this is good news” for Leamington and the town's biggest private employer, with about 700 local employees.
While other Canadian cannabis giants like Canopy Growth and Aurora have in recent days announced facility closures and operational cuts, he said Aphria has been performing well.
The merger keeps hundreds of cultivation jobs safe at the company's Aphria 1 and Diamond greenhouse cultivation operations in Leamington.
The companies, as well as industry observers, see the merger as complementary, with each party bringing to the table assets and market outreach that benefit both. Tilray, for example, anticipated having to buy 35,000 kg of cannabis product from third-party sources in 2021, a shortfall that can now be filled by Aphria One and Aphria Diamond in Leamington. Aphria was also looking at expanding into beverages, while Tilray has a joint venture with American beer giant Anheuser-busch.
“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 Wednesday in a statement announcing the merger. “I look forward to leading the talented teams of both Aphria and Tilray as we seek to create a leading global cannabis and consumer packaged goods company with a portfolio of medical, wellness and adult-use brands consumers love.”
Tilray CEO Brendan Kennedy added: “By leveraging our combined strengths and capabilities, we expect to be able to meet the needs of consumers more effectively all over the world and advance patient care.”
Eyeing the growing opportunities in Europe, Aphria's first indoor medical cannabis production facility is about to start operations in Germany, while Tilray has an outdoor cannabis operation in Portugal.
Based on annual revenues, Aphria and Tilray, with combined annual net revenues of $874 million, would become the largest global cannabis company.
Tilray briefly had its own Leamington cannabis processing footprint with its wholly owned High Park Gardens subsidiary, a 662,000-square-foot cultivation facility, but the company announced last May it was closing, with the loss of about 120 local workers, after only a year.
Asked whether creation of the new company could lead to reconsideration of that closure decision, an Aphria spokeswoman said in an email response that “the combined entity is considering all opportunities with its various properties.”
But Wiggins said that's unlikely.
“I don't think there's any hope for the resurrection of High Park in Leamington,” he said, adding he doesn't even foresee Tilray's existing cultivation operation in London surviving, although the London “processing for edibles will continue.”
Wiggins believes a big part of the $100 million in estimated merger savings over the next two years will come from bringing together the sales and marketing divisions of the two existing companies. Aphria's sales and marketing operations are headquartered in Toronto.
Aphria said the new company will maintain “principal offices” in Leamington, Toronto, New York, Seattle, on Vancouver Island, and in Portugal and Germany.