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Consolidation looms for cannabis companies

Expect more deals as business look for more ways to grow

by Diane Peters

Volume 1: Issue 17

It was the deal heard around the cannabis world: On December 16, Tilray Inc. and Aphria Inc. joined forces to create the world’s largest cannabis business. Together, the company, which kept the Tilray name but saw Aphria shareholders control about 62% of the business, is valued at about $5 billion, according to the Globe and Mail, and is expected to produce about $900 million in annual revenue.

As big of a deal as it was, and it was the largest takeover in the space since legalization in October 2018, it wasn’t shocking – growth in this still budding industry has been hard to find. With supply outpacing demand, with investors wanting exits and with the potential of selling to other countries still on the horizon, consolidation is one of the only ways to cut costs, boost revenues and, hopefully, increase profits. 

“The market in Canada is way oversaturated, there’s too many [licensed producers], there’s too much [growing capacity] for the size of the market here,” said Irwin Simon, who was the CEO of Aphria, and now leads the combined entity, in an interview with the Globe and Mail after the merger.

The Weekly Chronicle is a subscription publication of Business of Cannabis.

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