Aphria stock and Tilray stock rallied after-hours Tuesday on a report that the two Canadian cannabis producers were discussing a merger that would create the nation’s biggest weed company — but potentially move its new headquarters to the U.S. Other marijuana stocks also rose late Tuesday.
Under the possible deal, as reported by BNN Bloomberg, the combined company would lord over 19% of Canada’s recreational pot market.
The possible plans to move the new company’s headquarters to the U.S. would allow it to tap a rapidly growing, legalizing market. An announcement could come as soon as this week, BNN Bloomberg said.
Aphria (APHA) would likely hold most of the new company’s board seats. Its shareholders would own a 60% of the new company, BNN Bloomberg said.
If the deal went through, the new company would likely keep Tilray’s (TLRY) name, BNN Bloomberg said. But it would put Aphria CEO Irwin Simon in the top spot.
Tilray CEO Brendan Kennedy, the story said, could take a seat on the new company’s board, but was unlikely to keep any executive-level job.
Talks were continuing, BNN Bloomberg said, with no guarantee the deal will go through. But Aphria and Tilray were looking to save as much as $100 million in annualized cost savings, the story said.
Under the possible deal, Aphria would do the heavy lifting on producing weed in Canada. The fate of Tilray’s production centers was unclear.
Neither company was immediately available for comment.
Aphria and Aurora Cannabis (ACB) were rumored to be in merger talks earlier in the year. The merger talks would come as Canada’s pot industry looks for ways to lean down, after years of losses.
Aphria in November said it would enter the U.S. via an agreement to buy craft brewer Sweetwater Brewing Co. for around $300 million. SweetWater is known for beers that use terpenes and hemp flavoring. Aphria said the brand was “closely aligned with a cannabis lifestyle.” Tilray owns Manitoba Harvest, a hemp company that sells products in the U.S. and Canada.
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Aphria, Tilray Leads Marijuana Stocks Higher
Aphria stock jumped 18% after hours in the stock market today. Tilray rose 16%. Canopy Growth (CGC) added 2%. Cronos Group (CRON) was up 3%. Aurora Cannabis gained 3.3%.
President-elect Biden has said he supports federal marijuana decriminalization. This month, the U.S. House of Representatives voted to pass the MORE Act, which would remove marijuana from the list of controlled substances.
The bill, however, faces little chance in the Senate. Two runoff elections next month in Georgia will determine the balance of the Senate, and how much advantage the Democrats will have in passing cannabis reform.
New Jersey, Arizona, Montana and South Dakota on Election Day approved ballot measures to legalize recreational marijuana. South Dakotans and Mississippi voters also backed some degree of medical use.
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