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Aphria-Tilray deal: Aphria shareholders vote for Tilray takeover

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Aphria (APHA.TO)(APHA) shareholders have voted in favour of the reverse acquisition of rival Canadian pot producer Tilray (TLRY). The decision helps pave the way for the blockbuster deal announced in December to form the world’s largest pot company by revenue.

The required two-thirds majority of Aphria shareholders backed a motion to approve the deal at a virtual meeting on Wednesday. Aphria shareholders had until 4 p.m. ET on April 12 to cast their vote by proxy.

A total of 108,409,367 Aphria shares were represented by proxy at the meeting, the company said, representing approximately 34.43 per cent of the issued and outstanding shares. Of that total, shares 99.38 per cent voted for the arrangement to acquire Tilray.

"The business combination will create a combined company with a strong financial profile, low-cost production, market share leading brands, distribution network and unique partnerships," Aphria chief executive officer Irwin Simon said in a news release on Thursday. "The combined company will be increasingly well positioned to deliver a sustainable attractive return for our combined shareholder base."

Irwin Simon, Hain Celestial's founder, chairman, president, and CEO, speaks during an interview with CNBC at the New York Stock Exchange (NYSE) in New York, U.S., November 8, 2017. REUTERS/Brendan McDermid
Aphria shareholders have approved a deal to acquire rival pot producer Tilray, in a deal that would create a new powerhouse in Canada's cannabis industry. REUTERS/Brendan McDermid

Earlier this month, shareholder advisory firms Institutional Shareholder Services and Glass Lewis and Co. threw their support behind the deal. Under the terms, Leamington, Ont.-based Aphria will receive 0.8381 shares of Nanaimo-based Tilray for each Aphria common share.

If the transaction is approved, Aphria's shareholders will own about 62 per cent of the outstanding Tilray shares on a fully diluted basis. Tilray's shareholders would see no adjustment to its holdings. The combined company would assume the Tilray name, and be led by Simon. Tilray's chief executive Brendan Kennedy would sit on the company’s nine-person board.

Aphria and Tilray said the new company will be “the world’s largest global cannabis company,” with pro-forma revenue of $874 million for the 12 months prior to the deal’s announcement on Dec. 16, 2020. The combination will solidify Aphria’s dominance in Canada’s recreational market, further outpacing its closest rivals, Canopy Growth (WEED.TO)(CGC) and Aurora Cannabis (ACB.TO)(ACB).

Aphria and Tilray have said they will be “well positioned” for growth in Europe, building on Aphria’s German assets and Tilray’s Portugal facility. In the United States, each company brings consumer packaged goods experience; Aphria, through its SweetWater Brewing business, and Tilray through its Manitoba Harvest Hemp Foods brand.

Aphria and Tilray estimate they will save about $100 million through synergies within two years of the combination. That could help ease pressure for “Tilray 2.0” that is currently being felt across the industry. Pot prices are falling due to a persistent oversupply, and COVID-19 lockdowns are challenging retail stores as well as production facilities.

On Monday, Aphria reported weaker than expected financial results, citing a demand hit brought on by government-led lockdown measures. Simon predicted the situation could normalize by summer, as provincial cannabis boards that supply independent stores and sell to the public through government retail arms increase their orders.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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