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Aphria-Tilray deal: Tilray shareholders approve tie-up with Aphria

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Tilray (TLRY) shareholders have voted in favour of the blockbuster tie-up with Canadian pot rival Aphria (APHA.TO)(APHA), paving the way for the formation of a new global cannabis powerhouse.

Shareholders of Nanaimo, B.C.-based Tilray approved three out of four proposed amendments at a virtual meeting held on Friday. The company did not immediately announce how many shareholders voted in favour of the amendments.

Friday's decision follows a resounding victory for shareholders of Leamington, Ont.-based Aphria who supported the deal. The company said 99.38 per cent of shares represented at its shareholders meeting on April 14 voted in favour of the reverse acquisition of Tilray. The deal is expected to close in the second quarter of 2021.

The combined company will assume the Tilray name and ticker symbol, and be led by Aphria CEO Irwin Simon. Aphria chief financial officer Carl Merton will be the CFO of the new company. Tilray chief executive officer Brendan Kennedy will sit on the company's nine-person board.

When will Aphria's stock stop trading?

Aphria's stock will be effectively suspended by the Nasdaq on Monday, according to a notice from the exchange. Tilray shares will continue to trade on the Nasdaq, and will commence trading on the Toronto Stock Exchange under the symbol TLRY on May 5, the company said on Monday.

"We're extremely excited to be joining Tilray now that the shareholder vote has occurred, and has passed," Merton told Yahoo Finance Canada on Friday. "We're excited to get started on day one."

The combination of Aphria and Tilray creates the world's largest pot firm based on revenue, and a dominant player in the Canadian recreational market, both companies said when the deal was announced in December. Aphria and Tilray pegged their combined revenue for the 12 months prior to the deal's announcement at $874 million, ahead of U.S. multi-state operators Curaleaf Holdings (CURA.CN) at $842 million, and Trulieve Cannabis (TRUL.CN) at $602 million. The combined company expects to control more than 17 per cent of sales in Canada's retail market."

Aphria and Tilray unveiled a corporate logo for the "new Tilray" on Monday that blends both companies' previous designs.

The new Tilray logo blends both Aphria and legacy Tilray’s branding. (Provided.)
The new Tilray logo blends both Aphria and legacy Tilray’s branding. (Provided.)

Friday's decision by Tilray shareholders comes after the company delayed its vote on the deal, which was originally scheduled for April 16. Shortly after announcing the delay, the company amended its bylaws to reduce the quorum requirement at the shareholder meeting to one-third from a majority of outstanding shares entitled to vote.

Despite this, analysts expressed confidence that Tilray shareholders would back the tie-up with Aphria. Cantor Fitzgerald analyst Pablo Zuanic estimates that company insiders own about 25 per cent of Tilray's stock, meaning only an additional eight per cent of eligible voting shares would be required for Friday's meeting to proceed.

Kennedy is the largest shareholder, with about 8.5 per cent of outstanding shares. Company insiders, including Michael Blue and Christian Groh, are also major owners. Kennedy, Blue and Groh founded Seattle-based private equity firm Privateer Holdings in May 2010. The firm later invested in Tilray.

"We have good conviction this deal will happen," Zuanic wrote in an April 16 note to clients.

Under the terms, Leamington, Ont.-based Aphria will receive 0.8381 shares of Nanaimo-based Tilray for each Aphria common share. Now that 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 combination of Aphria and Tilray is expected to deliver approximately $100 million of annual pre-tax cost savings within two years of the completion of the transaction.

In the U.S., the company will leverage Aphria's newly acquired craft beer company, Sweetwater Brewing, to introduce its brands through CBD-infused beverages ahead of potential federal legal reforms on pot. Aphria also brings sizeable German medical cannabis business, CC Pharma, and its European operations. Those will complement Tilray's cultivation and production facility assets in Portugal to address demand in Europe.

"Our combined company will be well positioned to pursue growth opportunities with our end-to-end, EU GMP supply and distribution chain," Kennedy said when the deal was announced in December.

"From a free trade standpoint, we can ship anywhere in Europe," Simon added.

Friday's vote had little impact on the shares of both companies. Tilray's Nasdaq-listed stock fell 1.07 per cent to $18.45 as at 1:20 p.m. ET. Aphria's Toronto-listed shares rose by 0.21 per cent to $18.96.

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

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