Growth of the canopy (CGC) said Thursday it would buy rival Supreme Cannabis to fatten the Canadian pot manufacturer’s recreational market share and expand the supply of premium weeds as competition increases. Most Canadian marijuana stocks turned higher.
The $ 435 million cash and cash deal, Canopy said, will provide Supreme brand’s popular premium pot 7Acres with $ 30 million and possible cost savings over the next two years. The acquisition is expected to be completed by the end of June.
Under the terms of the deal, Supreme Cannabis shareholders will receive 0.01165872 of the ordinary Canopy share and $ 0.0001 in cash in exchange for each Supreme Cannabis share.
Canopy, the largest stock by market capitalization, said the acquisition would give the combined company, Proforma, a 6% Canadian leisure market share. Estimates of which pot manufacturer has which market share vary. But they showed that no player dominates the space.
On this background, Tilray (TLRY) and Africa (APHA) announced plans to merge. Earlier this month, Canopy completed the acquisition of Ace Valley, a cannabis brand in Ontario.
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Supreme Cannabis reported a net loss in the last quarter. But it reported a positively adjusted EBITDA – an adjusted figure for the industry to measure profitability. EBITDA means earnings before interest, taxes, depreciation and amortization.
Supreme reported net sales of C $ 18.3 million in the quarter, up 54% from the previous quarter. This year the company has issued more shares or stakes.
Piper Sandler analyst Michael Lavery, who covers marijuana stocks, said in a research note that the acquisition of Canopy helped “fill the gap” in Canopy’s product line. He said Canopy “has not yet created a first-class brand in Canada.” But as the marijuana industry is still trying to make a steady profit, he said he did not expect the deal to help bottom Canopy.
“Supreme is profitable, but it is still small and we do not expect this deal to have a significant impact on the time when Canopy will reach profitability,” he said.
Shelter growth stock, marijuana stocks
Today, Canopy Growth stocks closed 4.8% on the stock market. Among other marijuana stocks, Aphria turned higher to reach 0.5%. Tilray (TLRY) erased the lost losses and ended up without money.
Kronos Group (CRON) increased by 0.9% and Cannabis Aurora (ACB) added 1.1%.
Marijuana supplies have cooled since the US team rally. This rally was prompted by greater hopes of easing US restrictions
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