Reuters — Shares of cannabis firm Tilray Inc. rose as much as seven per cent on Wednesday after announcing a deal to buy hemp food maker Manitoba Harvest for up to $419 million as it seeks to gain a foothold in the lucrative business.
The deal comes after the U.S. farm bill, which legalized commercial production of hemp in the country, opened access to a large market for Nanaimo, B.C.-based Tilray and its peers.
Winnipeg-based Manitoba Harvest, majority-owned by Compass Group Diversified Holdings, and Tilray will develop wellness products and hemp-based consumer food products.
Manitoba Harvest’s product lines include Hemp Hearts, Hemp Oil, Hemp Yeah granola and protein powder and Hemp Bliss milk, plus a new Hemp Yeah wellness bar the company said it plans to launch in North America this summer.
Hemp is a type of cannabis plant with no or extremely low concentrations of the psychoactive compound known as THC, the ingredient in marijuana associated with “high” feelings.
The cash and stock deal helps Tilray expand beyond the food category, including extracts giving access to a broad portfolio of products currently distributed in 16,000 stores across North America said analysts at Cowen and Co.
Tilray said the deal will bring Manitoba Harvest expertise in working with cannabinoids, including cannabidiol (CBD) while allowing Tilray to “accelerate” its expansion into the U.S. and Canadian markets for CBD products where legal.
Tilray will initially pay $277.5 million in cash and stock at the close of the deal, expected within the next 30 days. The remainder will be paid six months after closing and on achieving certain milestones.
Compass Diversified Holdings’ shares were also up three per cent at $16.15.
— Reporting for Reuters by Shanti S Nair in Bangalore. Includes files from Glacier FarmMedia Network staff.