Aphria boosts ambitions for global growth with big bet on Nuuvera
Cannabis company Aphria Inc. made a massive bet on international markets on Monday, agreeing to pay around $826 million for a competitor with no record of cannabis production but a number of potentially significant assets overseas.
Nuuvera Inc., the target of the friendly takeover bid, became a publicly traded entity only three weeks ago and has yet to secure a licence from Health Canada to grow and sell cannabis in Canada. Through a subsidiary, however, it has a licence to import and export pot products and has, in recent weeks, been acquiring overseas properties and inking supply deals in countries like Germany, Italy and Spain.
The merger — which stands in contrast to Aurora Cannabis Inc.’s $1 billion-plus takeover of well-established cannabis producer CanniMed Therapeutics Inc. last week — shows the degree to which Canada’s major cannabis companies are looking for international opportunities, even as the domestic market gears up for recreational legalization this coming summer.
“The acquisitions opens the door to key international markets, including Germany, Italy, Spain, the United Kingdom, Malta, Israel, Uruguay and others,” said Aphria CEO Vic Neufeld, on an analyst call Monday morning. In Italy alone — where Nuuvera recently acquired one of only seven import licences by buying a Genoese company — the medical market is expected to reach $9 billion in the coming years, Neufeld said.
There are also opportunities for significantly higher margins in overseas medical markets, such as Italy, where prices are elevated by a lack of local supply. “The Canadian domestic recreational market will be extremely competitive, and we may even run into an oversupply, so that will put pressure on pricing,” said an industry source.
“If you look at what Aphria has done so far, they’ve developed a very sizable domestic production profile, they’ve made a couple of investments in the U.S., but their exposure internationally has been a little bit more limited than other LPs,” said the industry source. “The acquisition of Nuuvera really positions them almost at the top of the pile for global reach right now.”