A blockbuster merger in the cannabis industry was announced Wednesday morning. Canadian peers Tilray (TLRY) and Aphria (APHA) are combining to make the world's largest marijuana company in terms of trailing 12-month, pro forma revenue.
The merger will be effected through an all-stock transaction. Aphria stockholders are to obtain 0.8381 of one share of Tilray for each Aphria share they own; Tilray stockholders will see no change in their holdings. Following the transaction, today's Aphria investors will own roughly 62% of the merged entity.
The merged company will retain the Tilray name, with the stock keeping its current ticker symbol. It will be led by Aphria's CEO Irwin Simon, with seven of the nine seats on the new business's board of directors going to present Aphria directors. The remaining two directors will be from Tilray, including that company's CEO Brendan Kennedy.
The two companies quoted Simon's comments about the deal:
We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S., and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital.
While Aphria and Tilray are both habitually loss-making, as one company, they will have above-average potential for the marijuana sector. The new company will hold significant assets in every product category, from hemp to cannabis-infused beverages to traditional marijuana flower. It will also have a strong international presence relative to the competition, with operations in such locations as Portugal and Germany.
In mid-afternoon trading on Wednesday, Tilray stock was up a robust 21.5%, far ahead of the gain of the S&P 500 index. Even Aphria -- essentially the acquirer in the deal -- was on the rise, at a 0.8% clip.