Picture: ISTOCK
Picture: ISTOCK

New York/London — Consolidation in Canada’s nascent marijuana industry is heating up, with two of the largest players agreeing to the biggest merger seen so far in the sector.

Aurora Cannabis agreed to buy rival MedReleaf for about C$2.9bn ($2.3bn) in stock, the companies said on Monday in a statement. The deal will create a producer with the capacity to grow 570,000kg a year of cannabis at nine facilities in Canada and two in Denmark. The merged company will also have distribution networks at home as well as in Europe, South America and Australia.

Canadian marijuana growers are racing to gain market share as Prime Minister Justin Trudeau pushes to legalise recreational use in 2018. Aurora is leading the effort to consolidate the industry, having acquired more than 10 targets in the past two years.

In another Canadian deal announced on Monday, Canopy Growth said it agreed to buy the 33% stake in greenhouse operator BC Tweed Joint Venture that it doesn’t already own. Canopy said separately it planned to list on the New York Stock Exchange.

Marijuana companies are also seeking to capitalise on investor enthusiasm. Share prices for producers have soared over the past year: the Bloomberg Intelligence Canada cannabis competitive peers index, which comprises 54 companies, has almost doubled in the period and has a market capitalisation of $65.4bn.

For the growers that emerge as industry leaders, the prize is not just a legal Canadian market — where sales could reach C$6bn by 2021, according to a report from Canaccord Genuity. Governments in other parts of the world, particularly Europe, are heading in a similar direction to Ottawa, and several Canadian growers have been keen to advertise their ambitions to grow and distribute cannabis overseas.

Monday’s deal eclipses what had previously been the industry’s biggest deal: Aurora’s C$775m acquisition of CanniMed Therapeutics, which was completed earlier in May. Aphria, another Canadian grower, bought Nuuvera for about C$444m in March.

Bloomberg