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Tilray Acquisition Of Manitoba Harvest Sets Early Pace For 2019 As 'Year Of Consolidation'

February 25, 2019 10:24 am
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In a deal establishing a new industry landmark by which one of Canada’s largest licensed producers is buying the largest hemp company in a deal worth as much as $419 million CAD ($319 million USD), Toronto-based Tilray (NASDAQQ:TLRY) looks to be muscling past its closest competitors — Aurora Cannabis ACB (NYSE:ACB) and Canopy Growth CGC (NYSE:CGC) — within the rapidly expanding U.S. CBD market.

It also offers affirmation that 2019 looks to be a big year for industry mergers, acquisitions and expansion as large tobacco, pharmaceutical, food, and beverage companies look to enter the legal cannabis and hemp marketplaces.

New Frontier Data’s Hemp Business Journal estimates that, in leading all hemp product categories, the hemp-derived CBD market will grow from a $390 million-dollar market in 2018, to a $1.3 billion market (or 3.3x) by 2022, representing a 27.2% 5-year CAGR.

“Tilray’s acquisition of Manitoba Harvest brings together the global leaders across cannabis and hemp and accelerates our entry into the CBD market,” explained Steven Yoo, Tilray’s director of corporate investments, who added that the plan is to leverage Manitoba Harvest’s network of 30,000 acres of hemp and 16,000 retail stores across North America.

According to the announcement, Tilray will pay $277.5 million CAD ($150 million CAD in cash and $127.5 million CAD in Tilray shares) in closing the deal, expected within the next 30 days.

In September 2018, Aurora Cannabis acquired Agropro UAB (Europe’s largest organic hemp company) and hemp processor and distributor Borela UAB in a deal worth approximately $8.1 million CAD ($6.2 million USD) in cash, and $1.4 million CAD ($1.1 million USD) in common shares of Aurora.

Beyond the popularity and market potential of CBD-related products, hemp is increasingly appreciated as a food supplement and meat substitute; its high protein content makes it a natural, versatile ingredient in the large and rapidly growing health food, vegetarian, and vegan markets.

As detailed in New Frontier Data’s new report, The Global State of Hemp: 2019 Industry Outlook, the total global hemp market reached $3.7 billion in retail sales in 2018, with an annual growth rate of 15% driven by continued strength in Chinese textiles, European industrials, Canadian foods and U.S. hemp-derived CBD market. The Hemp CBD market is expected to quickly expand and be the primary driver of global industry growth. By 2020, the global market will reach a $5.7B across all markets, representing a three-year CAGR of 17.5%. The global growth in 2019 and 2020 is expected to be driven by the 2018 Farm Bill in the U.S., Epidiolex going to market in the U.S. and Europe, Canadian licensed cannabis producers (LPs) entering the international hemp market and the rise of the Chinese hemp CBD nutraceutical and supplement market.

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