Aphria and Tilray to merge and create the largest cannabis producer by sales

Aphria Inc. (TSE: APHA) announced a reverse merger with its competitor, Tilray Inc. (NASDAQ: TLRY) on Wednesday – a move that will establish the largest cannabis producer in terms of sales. The Canadian company also said that the merger will help it expand its footprint in the U.S. market.

Tilray shares were reported about 30% up in premarket trading on Wednesday. Including the price action, the Nanaimo-based company now has a per-share price of £7.32 versus a significantly lower £1.83 per share in March. Tilray had started 2020 at £12.12 per share.

In comparison, the Canadian company performed largely downbeat in the stock market last year with an annual decline of roughly 80%. At the time of writing, it has a market capitalisation of £780 million.

Aphria acquired SweetWater Brewing Co. for £221.74 million in November

For each share of Aphria, the reverse merger will give its shareholders 0.8381 shares of Tilray. Aphria shareholders will have 62% ownership in the new company. The news comes only weeks after the international producer and distributor of recreational and medicinal cannabis announced a strategic acquisition of SweetWater Brewing Co. for £221.74 million.

In a joint statement on Wednesday, the two companies revealed that CEO Irwin Simon of Aphria will head the combined company. Aphria will turn into a subsidiary of Tilray, which in turn will continue to trade in the United States on the Nasdaq Stock Exchange.

Rivals Canopy Growth and Aurora Cannabis have also been engaged in striking deals this year in a bid to penetrate the U.S. market, once the Federal regulations change under Joe Biden’s government.

Aphria previously tried merging with Canopy Growth and Aurora Cannabis

Aphria Inc. was previously rumoured considering a merger with Canopy Growth and Aurora Cannabis. Talks with both companies, however, failed at early stages. Canopy Growth said in a report published in November that its loss came in smaller than expected in the fiscal second quarter.

Aphria shares jumped roughly 10% in premarket trading on Wednesday. At £5.99 per share, the Leamington-based company is now more than 50% up year to date in the stock market after recovering from a low of £1.76 per share in March.

In comparison, Aphria performed fairly downbeat in the stock market last year with an annual decline of close to 20%. At the time of writing, it is valued at £1.73 billion.