Less than six weeks after announcing its $300 million acquisition of U.S. craft brewer SweetWater Brewing Company, Canadian pot grower Aphria (APHA) has dropped a bombshell on the cannabis industry.
Earlier this week, Aphria and fellow Canadian cannabis company Tilray (TLRY) announced they will be merging to create the largest global cannabis producer. The all-stock deal will give Aphria shareholders 62% ownership of the newly combined company. So what will the new deals mean for Aphria in 2021?
The acquisition of SweetWater Brewing was a way for Aphria to leverage existing U.S. infrastructure for what it hopes will be the eventual federal legalization of cannabis. It additionally is a cultural fit, and management says it will immediately be accretive to earnings before interest, taxes, depreciation, and amortization (EBITDA).
The merger with Tilray is a major move to grow quickly. The combined company will take the Tilray name, but be run by Aphria CEO Irwin Simon. Together, the moves show that Aphria is highly focused on becoming a major global player in the cannabis sector.
Federal legalization of cannabis in the U.S. would cement the opportunity for Aphria. However, investors may not see the benefits of these moves in 2021, as action on that front in Washington is likely further down the road. But Aphria has already been steadily growing revenue, and it may reach profitability even before the U.S. legalizes its products. Investors seeking some exposure to the cannabis industry in their portfolios may want to consider a position in Aphria.