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Tilray makes the richest deal in an effort to jump into U.S. CBD market. Tilray buys hemp-food maker Manitoba Harvest for $419M.
Tilray is acquiring the parent company of hemp-food maker Manitoba Harvest for up to $419 million in a cash-and-stock agreement. Cannabis producer from the Nanaimo quickens its entry into the North American CBD market. This deal will give Tilray ownership of a high-profile brand and one of the biggest hemp-food makers in the world. It also gives Tilray access to Manitoba Harvest’s retail network of 16,000 stores across the U.S. and Canada that includes Costco, Amazon, and Wal-Mart.
Investors like this Tilray’s arrangement, with shares of the marijuana producer jumping close to 5% in intraday trading. But Tilray’s acquisition of Manitoba Harvest should encourage more than a temporary gain.
With its new deal, Tilray appears to beat its biggest rivals, Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC). It looks Tilray manage to stake its claim in a potentially huge market.
Tilray Overtakes Aurora Cannabis and Canopy Growth in the U.S. Hemp Market
The biggest Canadian marijuana producers, all three, weren’t modest about showing their tends to enter the United States’ market. The problem is, marijuana is illegal at the federal level. So, they can’t operate in the U.S. and hold their listings on major stock exchanges in such a situation.
Hemp is a different story. By definition, hemp is cannabis that contains low levels of the psychoactive ingredient THC. The U.S. legalized hemp in December 2018. That opened the way for the major Canadian marijuana producers to jump into the U.S. hemp market.
Canopy Growth was the first. The company published in January that it had ensured a license to produce and prepare hemp in New York state. Canopy also plans to spend between $100 million and $150 million to build a large-scale hemp production facility in New York.
Meantime, Aurora Cannabis has been much more careful. CEO Terry Booth said that Aurora would “enter when it’s proper to enter, and when it’s legal to enter into the United States market.”
Tilray’s smart move
But Tilray’s acquisition of Manitoba Harvest sets it winning of both of the bigger rivals.
Tilray’s acquisition of Manitoba Harvest seems to be a smart activity. The deal gives Tilray an immediate position in the North American hemp CBD market. Tilray is financing the acquisition through both cash and stock. More than 1/5 of the buying price isn’t expected until six months after the transaction closes.
This acquisition is just the latest exemplar of Tilray’s business courage. The company’s acquisition of Natura Naturals last month boosted its production capacity. That deal was part in cash and part in stock with much of the purchase price associated with reaching predefined quarterly production milestones over a 12-month period.
Tilray showed an intention to win the total cannabis market. Its entrance into the potentially lucrative U.S. hemp market is the sign of that. The company’s chances of taking a leading role appear to be greater than ever.