The big news in the cannabis industry in the past week was two parts of the same story. First, it was revealed that merger talks between two of the largest companies in the industry – Aphria (NASDAQ 🙂 (TSX 🙂 and Aurora Cannabis (NYSE 🙂 (TSX 🙂 – were addressed in detail. And then, secondly, suddenly, the deal was over.
The news sent the stock of both companies up a bit and led analysts to respond more cautiously than enthusiastically.
Earlier last week, reports of a possible merger broke because talks between the two Canadian cannabis growers had progressed rapidly. Both Aurora and Aphria have large international footprints. Aurora, with a market capitalization of $ 1.27 billion, operates in 24 countries, making it the industry's largest global presence. Aphria is about the same size.
But once these discussions were made public, negotiations stalled. According to media reports, the disagreements related to the remuneration of directors and the composition of the board of directors of the new entity.
The proposed merger would have resulted in an all-share deal, with Aphria holding a 51% stake in the new combined company and Aurora 49%, while Aphria CEO Irwin Simon would have been appointed CEO of the new company.
Deal Under Scrutiny
Analyst Aaron Gray of Alliance Global Partners reportedly claimed the merger. , which would have consolidated two of the top marijuana growers in the industry, would make more sense at a time when there was more brand awareness among consumers, while Stifel analyst Andrew Carter reportedly emphasized that regulators would investigate such a deal because it would be a deal mean company would control about a third of the legal market for recreational pots in Canada.
Estimates estimate the size of the proposed merged company to be approximately $ 3.5 billion.
The Aphria stock fell immediately after news of the failed deal came out, shed about 4%, but continued to rise towards the end of last week, closing at C $ 6.93 ($ 5, on Friday). 13) in Toronto and $ 5.10 in New York, which equates to approximately 9% profit for the week
Yesterday Aphria achieved 1.57% on the and 0.87% on the while Aurora about 3 % lost on both exchanges.
For their part, Aurora Cannabis stocks rose sharply after news of the interruption of the talks hit the wire, with about 11.5% on July 15 in the US and just under 8% in Canada . Those gains were paired by the end of the week, as the stock closed at $ 11.88 ($ 16.14) last Friday. Aurora shares lost a further 2.86% in New York yesterday, closing at $ 11.54, and down just over 3% in Toronto, closing at C $ 15.63.
Aurora has also decided to continue restructuring its operations by three of its offices in Europe – in Portugal, Italy and Spain – lay off about a quarter of its workers in the EU. The move was blamed for what it called the softer-than-expected demand for medical cannabis on the continent. The activities in Germany and Denmark are not affected.
Illinois sees tax revenue rising
The growth of the marijuana sector is not only good for stakeholders, but states that have chosen to legalize the product are reaping the rewards.
The state of Illinois, which legalized recreational cannabis on January 1, has just released tax revenues for the first half of 2020. The new industry has added $ 52 million to public treasuries in the past six months. .
