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Tilray shares surge 25% on merger with Aphria to create world's largest cannabis company

Zack Guzman
·Senior Writer
·2 min read
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Tilray shares surged more than 25% in pre-market trading Wednesday on the announcement of a merger with Canadian cannabis peer Aphria to create the world’s largest cannabis company by revenue.

The stock-for-stock combination will maintain the Tilray (TLRY) branding and ticker in a reverse merger that will swap shares at a 23% premium to where Tilray shares closed December 15. The combined company will be led by Aphria (APHA) CEO Irwin Simon, who will serve as CEO and chairman once the deal closes as expected in the second quarter of 2021. Tilray CEO Brendan Kennedy will serve on the board.

“Our highly complementary businesses create a combined company with a leading branded product portfolio, including the most comprehensive Cannabis 2.0 product offerings for patients and consumers, along with significant synergies across our operations in Canada, Europe and the United States,” Simon said in a press release. “Our business combination with Tilray aligns with our strategic focus and emphasis on our highest return priorities as we strive to generate value for all stakeholders.”

On a combined revenue basis, the companies together boast more than $685 million in net revenue over the last 12 months, which would slightly edge out U.S. multi-state operator Curaleaf (CURLF.)

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Tilray, which had been aggressively cutting costs ahead of the deal, had been growing revenue by increasingly growing costs by focusing on more premium mainstream offerings, which grew to represent more than 70% of the company’s adult use sales compared to about 55% earlier in the year. The company was on track to reach its goal of adjusted profitability with a net loss of $1.5 million in its latest quarter.

Unlike other Canadian operators, Aphria had already established a track record of profitability. The companies estimated the deal would add about $78 million in cost saving synergies.

The combination comes as both companies have been looking to grow footprints in the consumer packaged goods space and flirting with growing a presence in the U.S.

Aphria recently paid $300 million to acquire Atlanta-based craft brewing company SweetWater Brewing, known for its flagship 420 themed line of beers. That move had already set up an interesting battle with Canadian cannabis peer Canopy Growth (CGC) which has been developing its own cannabis drinks with the billions in funding raised from Corona maker and beer giant Constellation Brands (STZ.)

Zack Guzman is an anchor for Yahoo Finance Live as well as a senior writer covering entrepreneurship, cannabis, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.

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