Medicinal pot growers to merge
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. 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 on 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 gamechanger. The combined company will be the industry’s undisputed leader, with more than 25 per cent of all the registered patients and production capacity across the country. It will have three production facilities in Ontario, and a total licensed sales capacity roughly of 6,000 kilograms of medical pot per year. The combined market cap of the two firms 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.
“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 in an interview.
Toronto-based Bedrocan and Smiths Falls, Ont.-based Tweed said their businesses are complementary. Tweed has a strong consumer focus and capital markets experience. Bedrocan’s Dutch licensor, Bedrocan BV, is recognized for producing high-quality products to treat a variety of illnesses.