B.C. pot titan Tilray Inc., U.S. brand giant team up on products

Cannabis giant Tilray Inc. is investing up to US$250 million in a revenue-sharing agreement with Authentic Brands Group (ABG) — the parent company of brands such as Juicy Couture, Nine West and Aeropostale — to bring cannabis-infused products to the North American market. The partnership will involve Tilray leveraging some of ABG’s biggest brand names to create specific pot products that could be sold alongside certain lines of clothes or shoes or other beauty products, subject to regulation. “Tilray will be the preferred supplier of THC and CBD for cannabis-infused products bearing any of the brands in ABG’s portfolio,” according to a joint press release by the companies. ABG’s portfolio of over 50 brands, which also includes such well-known labels as Marilyn Monroe, Nautica, Greg Norman and Vince Camuto, generates about US$9 billion in retail sales annually. The deal will give Tilray a massive retail distribution network across the U.S. in particular, where ABG operates more than 4,500 branded freestanding stores. Under the terms of the agreement, Nanaimo, B.C.based Tilray will pay ABG $100 million initially, and later, up to US$250 million in cash and stock upon satisfying commercial or regulatory milestones. “The reason we signed this agreement is because we’re getting a global licence to use these very iconic brand names. That fits into our strategy of valuing brands ...,” Tilray CEO Brendan Kennedy said.

Tilray’s Nasdaq-traded shares fell more than 17 per cent Tuesday to US$82.88. A post-IPO lockup was to expire Tuesday, freeing about 66 million subordinate voting shares for trading. But Tilray’s largest investor, Privateer Holdings Inc., said last week it won’t sell in the first half of 2019. “Consumers tend to trust existing brands ...,” Kennedy added, referring to edible pot products that are expected to become legal in Canada in October. Edibles, concentrates and dried pot flower are legal in only 10 U.S. states and Washington, D.C., but the total market is at least four times the size of Canada’s. The deal will entail a 49-51 per cent revenue split, with Tilray having the right to get up to 49 per cent of the net revenue from pot products made at its facilities, but bearing ABG brands. It also includes a guaranteed minimum payment of up to US$10 million annually for a decade, subject to achieving certain milestones.