Licensed marijuana producer Aphria signed a deal to buy Broken Coast Cannabis on Monday. The deal is valued at $230M.
Aphria Inc. has inked a deal worth $230 million with Vancouver Island-based marijuana producer Broken Coast Cannabis Inc. In the agreement, Aphria will pay up to $10-million cash with the remainder of the investment provided in shares. The stocks will be sold at a price of $15.09 per share.
Aphria Chief Executive Vic Neufeld thinks this is a major win for the Canadian firm. He states,
“Adding one of Canada’s most sought-after premium brands represents a major triumph for Aphria and our shareholders and firmly establishes our position as a Canadian leader in premium indoor cannabis production.”
Aphria shares surge after the deal
After the deal was announced, shares of Aphria went up over 20 percent. In Monday late-day trading, the price hit $21.70.
As part of the deal, Aphria has approved a future expansion project to increase annual capacity of an indoor cannabis production facility on Vancouver Island to 10,500 kilos. In addition, the deal is expected to close by Jan. 31.
Co-founders to stay with Broken Coast
All three of the co-founders are still excited to remain with the company. Roberto Bresciani, co-founder, and director of Broken coast say they will retain autonomy.
“While we are joining a talented large-scale greenhouse operator, Broken Coast will retain a high level of independence and our existing management and production teams will continue to drive our corporate strategy.”
This acquisition occurs less than a month after Aphria vouched to invest 10-million in a venture combing two cannabis brands.
According to Vahan Ajaman, a research analyst with Beacon Securities Ltd., Aphria’s move solidifies his claim that mergers and acquisitions in the cannabis sector will increase over the course of the year. This is as companies prepare for recreation sales of legal marijuana this July.
Ajaman says key components of the acceleration include combinations of indoor and greenhouse production and establishing facilities in multiple provinces. He says,
“We foresee more such tie-ups in the sector, including deals between cannabis companies and alcohol/tobacco/pharma companies.”