This year has seen significant cannabis market consolidation—largely driven by Canada’s nationwide cannabis legalization in October—as companies look to expand their global geographical footprints and gain market share. Even small companies are looking to expand their reach or be acquired to gain access to larger companies’ infrastructure and compete in an increasingly competitive industry.
In November alone, we’ve seen Dixie Brands Inc. and Academy Explorations Limited (a reporting issuer in Ontario) complete a reverse takeover transaction (following Dixie’s close of its Series C fundraising round of approximately $25 million), forming a Delaware-incorporated operating company named, ultimately, Dixie Brands Inc. The move comes as Dixie Brands plans to expand beyond its current four-state operations “into four to six additional states in 2019 through partnerships with licensed and regulated producers in each state,” according to the company’s press release.
Edmonton, Canada-based Aurora Cannabis, a major player on the global cannabis field, has announced a number of significant M&A transactions this year, the latest of which is the acquisition of Uruguay-based ICC Labs Inc., which according to Aurora’s press release, “establishes Aurora as an industry leader in Latin America, a region which encompasses more than 650 million people from across Mexico, the Caribbean, Central America, and South America.”
Toronto-based Lineage Grow Company Ltd. in late November announced the signing of a definitive agreement to acquire California-based Walnut Oaks LLC (dba Agris Farms).
Aphria Inc. announced in November its proposed acquisition of CC Pharma GmbH, a distributor of pharmaceutical products to more than 13,000 pharmacies in Germany.
And that’s just the tip of the iceberg.
“There will be a group of companies at the top, the big producers, and some smaller producers at the bottom, like craft beer,” Jacob Ripshtein, Aphria’s new president, recently told Bloomberg.com. “I suspect there will be some in the middle who will be very challenged to stay around.”
For now, the North American market remains split among companies of all sizes. On the cultivation side, a third of the industry reports cannabis production square footage of less than 5,000 square feet; a third falls between 5,000 square feet and 25,000 square feet; and 17 percent are cultivating on 80,000 square feet or more, according to Cannabis Business Times’ 2018 “State of the Cultivation Industry Report.” Of note, however, is that over the past three years, the number of small cultivators (less than 5,000 square feet) has remained the same, while the number of large producers (80,000 square feet or more) has jumped 10 percentage points.
The editors of Cannabis Business Times and Cannabis Dispensary launched M&A Weekly to help you stay up to speed on the rapidly evolving cannabis landscape and how it will impact your business. It not only will bring you the latest news in industry mergers and acquisitions, but will offer you strategic intelligence, whether you are looking to acquire other cannabis businesses, to be acquired, or simply to help navigate the massive wave of consolidation that is sure to continue to swell.
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