Aphria, Tilray announce $3.9B combination
Aphria (APHA) and Tilray (TLRY) announced that they have entered into a definitive agreement to combine their businesses and create the world’s largest global cannabis company based on pro forma revenue.
The deal is pursuant to a plan of arrangement under the Business Corporations Act and the implied pro forma equity value of the combined company is approximately $3.9B, based on the share price of Aphria and Tilray at the close of market on December 15.
Following the completion of the arrangement, the combined company will have principal offices in the United States, Canada, Portugal and Germany, and it will operate under the Tilray corporate name with shares trading on Nasdaq under ticker symbol (TLRY).
The combined company will have a complete portfolio of branded Cannabis 2.0 products in Canada.
In the United States, the combined company will have a consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater Brewing and Manitoba Harvest.
Under the terms of the Arrangement, the shareholders of Aphria will receive 0.8381 shares of Tilray for each Aphria common share, while holders of Tilray shares will continue to hold their Tilray shares with no adjustment to their holdings.
Upon the completion of the arrangement, Aphria Shareholders will own approximately 62% of the outstanding Tilray Shares on a fully diluted basis, resulting in a reverse acquisition of Tilray, representing a premium of 23% based on the share price at market close on December 15 to Tilray shareholders.
On a pro forma basis for the last twelve months reported by each company, the combined company would have had revenue of $685M.
Upon completion of the arrangement, Aphria’s current chairman and CEO, Irwin Simon, will lead the combined company as chairman and CEO.
The board of directors will consist of nine members, seven of which, including Simon, are current Aphria directors and two of which will be from Tilray, including Brendan Kennedy, and one of which is to be designated.
The combined company will have pro forma revenue of $685M for the last twelve months reported by each company, the highest in the global cannabis industry.
In Canada, the combination of Aphria and Tilray will create the leading adult-use cannabis company with gross revenue of C$296M in the adult-use market for the twelve months reported by each company.
The combination of Aphria and Tilray is expected to deliver approximately C$100M of annual pre-tax cost synergies within 24 months of the completion of the transaction.
The combined company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses.
Under the terms of the agreement, the arrangement will be carried out by way of a court approved plan of arrangement under the Business Corporations Act and will require the approval of at least two-thirds of the votes cast by the Aphria Shareholders at a special meeting.
Approval of a majority of the votes cast by Tilray stockholders will be required to, among other things contemplated by the Agreement, authorize the issuance of Tilray shares to Aphria shareholders pursuant to the Arrangement. Following completion of the Arrangement, Aphria will become a wholly-owned subsidiary of Tilray, with Aphria shareholders owning approximately 62% of Tilray.
The arrangement is expected to close in the second quarter of calendar year 2021 following the receipt of such regulatory approvals, as well as court approval of the Arrangement.
Each of Aphria’s and Tilray’s respective directors and officers and certain principal Tilray Stockholders have entered into voting support agreements agreeing to vote their Aphria Shares or Tilray Shares, as applicable, in favor of the resolutions put before them pursuant to the agreement.
Note that this merger probably was forced on the companies by market forces. Covid-19 pandemic has hurt cannabis industry similar to restaurants and movie theaters. APHA is up 5 cents to $8.18. TLRY is up $1.51 to $9.38. TLRY shares have an all time high of $300.
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