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Tilray makes the richest deal yet to jump into the US CBD market



Marijuana company Tilray Inc. announced its most expensive acquisition to date early Wednesday, and agreed to spend more than $ 300 million on a company claiming to be the world's largest hemp food.

Tilray

TLRY, + 0.71%

agreed to buy Manitoba Harvest for $ 419 million, or $ 317 million, in cash and stocks to strengthen its strength in the US market for CBD products . Tilray now expects to launch CBD-derived products in the US already this summer, according to managers.

After the passage of U.S. Pat. The farm bill, which legalized industrial hemp and removed the CBD from the Drug Enforcement Administration's list of controlled substances, cannabis operators in Canada have furiously made deals in the United States to extend operations south of the border. Canopy Growth Corp.

CGC, -2.46%

WEED, -2.75%

has declared its intention to make significant investments in New York State, and Aurora Cannabis Inc.

ACB, -1.70%

ACB, -1.61%

has also begun to acquire hemp products. Cronos Group Inc.

CRON, + 1.50%

CRON, + 1.81%

has not yet discovered hemp-related operations in the United States

Don't miss: All you need to know about the CBD, the non-intoxicating cannabis elixir that is not fully legal – but

While the Brightfield Group has said the hemp CBD market in the United States could reach $ 22 billion by 2022, Tilray, CEO Brendan Kennedy, not that anyone has enough data to formulate realistic projections.

"It is impossible to know at this point whether it is an exact number or not," Kennedy said in a telephone interview with MarketWatch. "What I know is that it is a great opportunity. If I think of hemp and CBD derived from hemp, it seems to be the hottest ingredient across the food industry, across beauty care, body care, and cosmetics industry. There is much interest in that particular ingredient today. What I don't know is how realistic is that $ 22 billion is. "

See also: How Marijuana Businesses Can Earn Without Selling The Pot [19659002] Manitoba Harvest CEO Bill Chiasson said the company has been in business for over 20 years and is the world's largest hemp maker. It generated C $ 94 million in 2018 sales, which is almost double what analysts predict Tilray on their own will generate for the year. Tilray reported $ 36 million in revenue in the first three quarters of the year, and analysts expect the company to report fourth-quarter revenue of $ 16.5 million when it issues revenue on March 18, according to FactSet.

Manitoba Harvest makes products such as granola, protein powder and hemp oil, and has 30,000 hectares of cultivation contracted for this year. The company's hemp-based products are sold by dealers in the United States and Canada, and have signed agreements with such as Costco Wholesale Corp.

COST, + 0.76%

Amazon.com Inc.

AMZN, + 1.22%

and Walmart Inc.

among other things.

In an interview with MarketWatch, Chiasson said that the current plan is to introduce a line of CBD-infused tinctures, a CBD spray and CBD gel caps. While the legality of CBD-based products in the US is relevant, Tilray and Manitoba Harvest said the new products will follow all necessary federal and state policies.

Video: How California's "Weed Nuns" Turned the CBD into a Million Dollar Business

"We have dealers who have expressed much interest in it, in states where it is more friendly, if you want , "Says Chiasson, adding that the company believes it complies with the relevant state and federal regulations.

"[Food and Drug Administration] has been very aware of not having claims, concrete claims that have not been tested and can" T backed up, says Chiasson.

Tilray acquires Manitoba Harvest, legally called FHF Holdings Ltd., from Compass Diversified Holdings LLC

CODI, -0.95%

and other shareholders. Tilray will pay $ 150 million in cash and $ 127.5 million in stock when the transaction is closed. In six months, Tilray will pay an additional C 50 million in cash and C 42.5 million in stock. Tilray will also issue an additional $ 49 million in stock if Manitoba Harvest achieves performance targets in 2019.

The Tilray share has reached 165% in the past year, as the S&P 500 index

SPX, + 0.15%

has increased 1.7%. Tilray went public at $ 17 and stocks peaked at $ 200 last fall before returning. Stocks closed down 0.7% at $ 77.03 on Tuesday.


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