Canadian Cannabis Producers Aphria And Tilray In Merger Talks

Canadian cannabis producers Aphria (TSX:APHA) and Tilray (NASDAQ:TLRY) are in the advanced stages of a merger negotiation.

The merged company is expected to retain the Tilray name and appoint Aphria Chief Executive Officer Irwin Simon as the new company’s leader. Aphria is likely to emerge with a majority of the combined company’s board seats and with its shareholders owning a 60% stake in the merged cannabis company.

Tilray CEO Brendan Kennedy is said to be in line to occupy a seat on the Board of Directors but is unlikely to retain an executive position.

The merged Aphria-Tilray company is also likely to move its headquarters to the United States as part of a strategy to bolster its presence in that country. Sales of cannabis in the U.S. have increased substantially over the past year amid rising marijuana usage during the Covid-19 pandemic. Aphria is currently headquartered in Leamington, Ontario while Tilray is based in Nanaimo, British Columbia.

The two companies are eyeing up to $100 million in annualized cost savings by joining forces, while Aphria would produce the bulk of the combined entity’s Canadian cannabis inventory to fully utilize its 1.3 million square-foot greenhouse in Leamington. It is unclear what will happen to Tilray’s production facilities.

If Tilray and Aphria manage to finalize an agreement, the deal would create the biggest cannabis company in Canada and a major player in the global marijuana sector. Tilray’s international operations include a world-class production facility in Portugal. Tilray also has substantial operations in Australia, Germany and the United Kingdom.

The combined company would control a leading 19% share of the Canadian recreational cannabis market with annual revenue of nearly $1 billion.

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