Aphria and Tilray in advanced discussions to merge

Canadian cannabis producers Aphria and Tilray are in advanced talks to merge, with an announcement possible as early as this week, according to Bloomberg News.

The merged company is expected to retain the Tilray name and appoint Aphria CEO Irwin Simon as CEO,. Aphria is expected to emerge with the majority of seats on the combined company's board and with its shareholders holding a stake in 60%, although this could change, added one of the sources with direct knowledge of the matter.

Negotiations between the two companies are currently underway, with no assurance that an agreement will be reached.

What's in it for me?

If Tilray and Aphria were to finalize an agreement, the resulting entity would become the largest cannabis company in Canada and a major player on the world market. Tilray's international operations, which include a production facility in Portugal, would add considerable weight to the new group. Tilray is also present in Australia, Germany and the UK. For its part, Aphria has a pharmaceutical distribution business in Germany.

The combined company would control 19% of the Canadian recreational cannabis market, with annual revenues of 930 million $.

The two companies anticipate savings of up to 100 million $ per year. Aphria could produce most of the combined entity's Canadian cannabis inventory and make full use of its 12-hectare greenhouse, while Tilray could liquidate its facilities.

The new group will also strengthen its presence in the United States. Cannabis sales have risen sharply in the United States this year, driven in particular by Growing cannabis consumption during the COVID-19 pandemic.

Last July, Aphria was already in discussions with Aurora, but negotiations between the two companies broke down due to differences over board composition and remuneration.

One of the main differences between Aurora and Tilray is that the latter generates around half of its revenues via its edible hemp business, Manitoba Harvest, an activity that could add stable income to Aphria's non-cannabis subsidiaries, such as the German pharmaceutical distribution company CC Pharma and Sweetwater Brewing, one of the largest independent craft brewers in the United States.