Tilray to acquire hemp co.

Cannabis producer Tilray Inc. has signed a deal to acquire Hemp Hearts-maker Manitoba Harvest for up to $419 million in cash and stock as the two companies look to launch CBD-infused products where permissible in the U.S.

The acquisition accelerates the Nanaimo, B.C.-based pot grower's entry into the U.S. market as the hemp food manufacturer's products are already on the shelves of retailers such as Wal-Mart, Costco and Whole Foods on both sides of the border, said Tilray chief executive Brendan Kennedy.

Tilray will look to leverage the food maker's manufacturing facilities in Manitoba and its supply chain to roughly 16,000 stores where their products are already sold in North America, he added.

After the recent passage of the U.S. farm bill that legalized hemp-derived CBD products, Kennedy anticipates that retailers will look to source from companies they have existing relationships with.

"They're going to want to go with suppliers that they know and trust. ... And so we think that gives us an advantage in pursuing that opportunity in the U.S.," he said.

Manitoba Harvest plans to launch a branded line of tinctures, sprays and soft-gels containing broad spectrum hemp extracts containing CBD — a compound derived from cannabis that doesn't get people stoned — in the U.S. where permitted this summer, said its chief executive Bill Chiasson. Hemp extract containing CBD is a "very important growth vehicle for us," he said.

The foodmaker — whose portfolio of products include Hemp Hearts, Hemp Oil and granola — hopes the transaction will fuel expansion of its existing business but it is also in discussions with retailers to stock its CBD-containing products.

"Being part of Tilray will certainly give us an advantage," he said.

Canadian pot companies have been eyeing hemp-derived CBD opportunities south of the border after the U.S. farm bill was passed late last year, opening the door for mainstream sales of these products.

Tilray in January announced a deal with Authentic Brands Group, whose brands include Juicy Couture and Nine West, to develop and sell co-branded cannabis products such as CBD-infused foot cream.

The market for hemp-derived CBD was estimated at US$591 million in 2018 and is expected to balloon to US$22 billion by 2022, according to the Brightfield Group.

By mid-2019, some 50 per cent of convenience stores may carry a CBD product and potentially 70 per cent of total retail outlets will sell them by 2020, Piper Jaffray & Co analyst Michael Lavery wrote in a recent note.

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