Tilray Inc. (TLRY) has taken the fusion spree seriously as a new deal has been signed to buy hemp food company Manitoba Harvest from Compass Group Diversified Holdings (CODI) for up to C$419 million. This deal with Compass Group marks the fifth in 60 days.
Tilray will purchase all of the issued and outstanding securities of FHF Holdings Ltd., also known as Manitoba Harvest, on a cash and debt-free basis. Tilray will pay C$277.5 million at closing and C$92.5 million six months after closing. The company will issue an additional C$49 million in Tilray shares based on Manitoba Harvest achieving certain performance milestones in 2019.
With the aid of over 16,000 stores at major retailers across the US and Canada, Manitoba Harvest has plans to launch a line of CBD containing Broad Spectrum Hemp Extracts as well as a line-up of Hemp Yeah! wellness bars this summer. The union of natural foods and cannabinoids, including cannabidiol (CBD), could bring out innovative new CBD wellness products and hemp-based consumer food products.
In the US and Canadian markets where CBD products are legal, Manitoba Harvest’s established distribution network could quicken Tilray’s expansion plans. As expected to be a wholly-owned subsidiary of Tilray, Manitoba Harvest will continue to operate its seed-to-shelf supply chain model and leverage its retail relationships across North America. The deal is likely to close within the next thirty days.
This comes on heels after the completion of the acquisition of Canada-based Natura Naturals Holdings Inc, a licensed cultivator of cannabis. This has given Natura’s 662,000 square-foot greenhouse cultivation facility to Tilray’s production improvement plans. During mid-January, Tilray has inked a $100-million partnership with Authentic Brands Group for developing and distributing weed-based consumer products in approved regions.
In December, AB InBev (BUD), the maker of Budweiser beer, has tied-up to study the production and distribution of non-alcoholic drinks infused with cannabis components with Tilray under a $100-million deal. Also, German company Sandoz, a subsidiary of Novartis (NVS), sealed an agreement with Tilray to make new medical marijuana products and co-brand some non-combustible products.
Meanwhile, Tilray is expected to report its fourth-quarter earnings results in mid-March. The top line could be driven by wholesale distribution in international markets and robust patient demand. However, the bottom line is likely to be in loss due to an increase in costs and expenses related to the consolidation spree.
Shares of Tilray opened higher on Wednesday and is trading in the green territory. The stock has risen over 255% since the IPO last year while it has fallen over 23% in the past three months. Wall Street analysts expect the stock to reach $131.25 per share in the next 52 weeks with the majority recommending a “buy”.