Is this the beginning of reefer merger madness? Canadian cannabis companies Tilray (TLRY) and Aphria (APHA) announced plans to combine Wednesday in a nearly $4 billion deal that will create the world's largest marijuana company. The two firms reported a combined $685 million in sales in the past twelve months.
The news comes as cannabis stocks have surged in the past month after several more US states voted to legalize cannabis for recreational use and investors hope for further federal decriminalization efforts now that Joe Biden has been elected as the 46th president.
Shares of Tilray soared nearly 25% on the news Wednesday and Aphria was up 3%.
Aphria chairman and CEO Irwin Simon, who will lead the combined company after the merger, said in a press release that the two firms hope to "create a leading global cannabis and consumer packaged goods company with a portfolio of medical, wellness and adult-use brands consumers love.”
The deal creates a company that could be able to compete more effectively against the likes of Canopy Growth (CGC) and Cronos Group (CRON) -- two other Canadian cannabis leaders that have the financial backing of US consumer products giants.
Corona owner Constellation Brands (STZ) has a big stake in Canopy while Marlboro parent Altria (MO) has invested in Cronos -- although both American firms have struggled with those cannabis investments so far.