On Dec. 16, Aphria and Tilray announced a merger to form the largest cannabis company in the world by revenue. As we said in our earlier note on speculation of the deal, we see a strong strategic rationale for the combined company, which will keep the Tilray name, including the ability to consolidate production in Canada, combine alcohol and CBD businesses in the United States in preparation for potential federal legalization, and the ability to combine efforts in Europe. We consider the target $100 million of cost synergies as achievable, as they represent just 9% of combined costs and overhead expenses, and we see significant low-hanging fruit.
In a reverse merger structure, Aphria shareholders will receive 0.8381 Tilray shares for each Aphria share, implying a 23% premium to Tilray’s share price before the announcement. Given relative sizes, Aphria shareholders will own about 60% of the combined company and get seven of the nine board seats. Tilray CEO and Chairman Brendan Kennedy will get one of Tilray’s two board seats, while Aphria CEO and Chairman Irwin Simon will keep both roles in the combined company.
