The marijuana company Tilray Inc. announced its most expensive acquisition to date early Wednesday, agreeing to spend more than $ 300 million for a company claiming to be the largest manufacturer of hemp foods in the world.
TLRY, + 0.71%
agreed to acquire Manitoba Harvest for C $ 419 million, or $ 317 million, in cash and shares to strengthen its presence in the US CBD market. Tilray is now planning to launch CBD derivatives in the US this summer, executives say.
Following the adoption of the US Farm Bill, which legalized industrial hemp and removed the CBD from the Drug Enforcement Administration's list of controlled substances, cannabis operators in Canada have furiously entered into agreements in the United States to expand their activities south of the border. Canopy Growth Corp.
stated its intention to make substantial investments in the State of New York and Aurora Cannabis Inc.
has also started to acquire hemp assets. Cronos Group Inc.
CRON, + 1.50%
CRON, + 1.81%
has not yet unveiled operations related to hemp in the United States
Not to be missed: all you need to know about CBD, the non-intoxicating cannabis elixir that is not quite legal – for the moment
Although the Brightfield Group has stated that the hemp-CBD market in the United States could reach $ 22 billion by 2022, Tilray's general manager, Brendan Kennedy, does not believe anyone has enough data to formulate realistic projections.
"It's impossible to know at this point if this figure is accurate or not," Kennedy said in a phone interview with MarketWatch. "What I do know is that it's a great opportunity. If I think of hemp and CBD derived from hemp, it seems to be the most popular ingredient in the natural food industry, in the beauty industry, body care and cosmetics. It seems that this ingredient is currently attracting a lot of interest. What I do not know is how much this $ 22 billion figure is realistic. "
See also: How marijuana companies can profit without selling pot
Manitoba Harvest CEO Bill Chiasson said the company has been in business for more than 20 years and is the world's largest manufacturer of hemp foods. It generated sales of $ 94 million in 2018, which is almost double what analysts expect Tilray to generate alone for the year. Tilray has announced a business turnover of 36 million Canadian dollars for the first three quarters of the year, and analysts expect the company to report a sales figure of 16.5 million Canadian dollars in the fourth quarter when it will release its results on March 18, according to FactSet.
Manitoba Harvest produces products such as granola, protein powder and hemp oil, and has contracted 30,000 acres of crop this year. The company's hemp products are sold by retailers in the United States and Canada, and it has contracts with companies such as Costco Wholesale Corp.
COST, + 0.76%
, Amazon.com Inc.
AMZN, + 1.22%
and Walmart Inc.
WMT, + 2.21%
, among others.
In an interview with MarketWatch, Chiasson said the current plan is to introduce a range of CBD-based tinctures, a CBD-based spray and CBD-based gel capsules. Tilray and Manitoba Harvest believe that the legality of CBD products in the United States is in question, but that these new products will meet all applicable federal and national guidelines.
Video: California's Weed Nuns Turn CBD into Million Dollar Business
"We have retailers who have expressed a lot of interest in that, in states where it is more user-friendly, if you like," said Chiasson, adding that the company believed it complied with applicable federal and national regulations.
"The [Food and Drug Administration] very clear about not wanting to make claims, specific claims that have not been tested and can not be saved, "said Chiasson.
Tilray acquires Manitoba Harvest, legally called FHF Holdings Ltd., from Compass Diversified Holdings LLC
and other shareholders. Tilray will pay C $ 150 million in cash and C $ 127.5 million in shares at the close of the transaction. In six months, Tilray will pay an additional $ 50 million in Canadian cash and $ 42.5 million in Canadian equities. Tilray will also issue an additional C $ 49 million if Manitoba Harvest achieves its performance targets in 2019.
Tilray share rose 165% last year, the S & P 500 index
SPX, + 0.15%
gained 1.7%. Tilray was made public at $ 17 and his shares surpassed $ 200 last fall before retiring. Shares closed down 0.7% to $ 77.03 on Tuesday.