The Bengal Bite 🐯 | Comparative "Canna"nomics | December 24, 2020
The biggest cannabis business story of the last few weeks has been the pending merger between Tilray and Aphria, two of the largest cannabis companies in Canada, to create the “largest global cannabis company.” “Largest,” in this case, meaning that the combined company would have the most revenue over the last 12 months - about $673m USD vs. #2 Curaleaf’s $648m.
It’s incredible how far the industry has come in such a relatively short time, but Tilray/Aphria’s reign will almost certainly be very short-lived - Curaleaf’s last quarter revenue already exceeded Tilray/Aphria’s, with GTI neck and neck.
The noise of stock markets sometimes obscures simple, important underlying patterns. By plotting the bigger picture on a simple graph, the rapid growth of U.S.-based cannabis companies jumped out as a critical pattern to watch in the years ahead and was a simple visual reminder of why we are focused on U.S.-based opportunities at Bengal Capital.
This week's Bite:
Biggest cannabis producer in Canada, and the world? The planned acquisition of Tilray by Alphria would make the world’s largest publicly-traded cannabis company by revenue, generating a lot of hype. (Seeking Alpha)
MSOs buy into new markets: Ayr expands its east coast footprint into Florida and New Jersey, while Columbia Care enters the Mid-Atlantic with the purchase of licenses in Pennsylvania, Maryland, Ohio and Virginia. (Marijuana Business Daily)
Americans socially distance with cannabis: Overall cannabis sales in the United States are up 67% from 2019 to $18 billion. (Leafly)
Market growth in the Great North: Canadian markets continue to expand with a solid 5.1% MoM growth between September and October of this year. (Marijuana Business Daily)
Read more below:
Aphria: not impressed with Tilray merger
The Aphria & Tilray merger on its face creates the largest publicly-traded company by revenue, however when you dig a little deeper that is not necessarily the case. When looking at just cannabis-based revenue, the company comes up short in comparison to American operators such as Trulieve or Curaleaf. That said, the merger of industry pioneers in Canada could bring about SG&A savings and synergies which may lead the combined company to generate EBITDA more reliably.
Cannabis M&A activity intensifies as investor sentiment brightens since November election
MSOs Ayr and Columbia Care are attempting to acquire their way into the big leagues, both completing nine-figure transactions this past week. Ayr’s $290m purchase of Florida MSO Liberty Life Sciences values the target at a rosey 4.8x 2022E adjusted EBITDA, while Columbia Care’s acquisition of Green Leaf values the mid-Atlantic MSO at 4.8x 2021E adjusted EBITDA. The remarkable take away from these transactions is the premium that MSOs are willing to pay in order to enter new, potentially lucrative, limited-license markets.
Marijuana sales data reveal Americans bought 67% more weed to survive 2020
Americans have already spent 67% more money on cannabis this year versus last. The increased overall industry revenue also reflects some states that have recently come online with recreational sales, such as Illinois and Michigan. With record sales in Arkansas, Colorado, California, Illinois, and more, it is no wonder the cannabis industry writ large had a strong year.
Canadian cannabis sales pick up pace to CA$270 million in October
Our neighbors to the north are having a banner cannabis year of their own with legal sales reaching their zenith this past October. To add some context, when annualized and converted to USD, Canada’s $2.5 billion in sales makes the nation’s market about the same size as Colorado’s legal industry.