Roof growth (CGC) said on Thursday it would buy rival Supreme Cannabis to increase the Canadian potmaker’s market share for recreation and expand its premium weed offering as competition intensifies. Most Canadian marijuana stocks turned higher.
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The $ 435 million cash and stock deal, according to Canopy, will give the company Supreme’s popular 7Acres premium brand and $ 30 million savings over the next two years. The acquisition is expected to close at the end of June.
Under the agreement, Supreme Cannabis shareholders will receive 0.01165872 of an ordinary share of Canopy and $ 0.0001 in cash in exchange for each Supreme Cannabis share.
Canopy, the largest pot capitalization market, says the acquisition will give the joint venture a “pro forma” Canadian market share for leisure of 6%. Estimates for which pot producer holds the market share vary. But they showed that no player dominates the space.
Against that background, Tilray (TLRY) and Africa (APHA) has announced plans to merge. Earlier this month, Canopy completed the acquisition of Ace Valley, a cannabis brand in Ontario.
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Fill in a ‘Void’
Supreme Cannabis showed a net loss during its most recent quarter. However, positive adjusted EBITDA has been reported – the industry’s adjusted figure to measure profitability. EBITDA stands for earnings before interest, tax, depreciation and amortization.
Supreme reported net sales of Canadian dollars $ 18.3 million in that quarter, up 54% from the previous quarter. The company issued more shares or units during this year.
Michael Lavery, analyst at Piper Sandler, which covers marijuana stocks, said in a research note that Canopy’s acquisition helped fill a gap in Canopy’s product range. He said Canopy “has not yet had an established premium brand in Canada.” But while the marijuana industry is still trying to make a steady profit, he said he does not expect the deal to help Canopy’s success.
“Supreme is profitable, but it is still small and we do not expect this agreement to affect the timing of Canopy’s profitable profit,” he said.
Shed Growth Stock, Marijuana Stocks
Canopy Growth stock closed up 4.8% in the stock market today. Among other marijuana stocks, Aphria swung higher to 0.5%. Tilray (TLRY) wiped out early losses and ended flat.
Cronos Group (CRON) increased by 0.9% and Aurora Cannabis (ACB) added 1.1%.
Marijuana shares have cooled since the U.S. postal election. The rally was spurred by greater hopes of easing restrictions in the US
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