Two major players in the Canadian cannabis market, Aphria Inc. APHA and Tilray Inc. TLRY, will merge.

The news, announced Tuesday via Bloomberg News, was confirmed Wednesday in an official press release.

The new company will keep the Tilray name, continue to trade on NASDAQ under the ticker symbol “TLRY” and will have Aphria’s current CEO, Irwin Simon, at the helm as Chief Executive Officer.

The board of directors of the merged company will count nine members, seven from Aphria, and two from Tilray; what’s more Aphria will be the majority stakeholder.

Why It's Important

The merger would create the world’s biggest global company based on pro forma revenue, which would have been for the last twelve months around CA$874 million ($685 million).

What’s more, the combination of Aphria and Tilray should deliver around CA$100 million of annual pre-tax cost synergies in the two years following the completion of the transaction.

Cantor Fitzgerald’s analyst Pablo Zuanic praised the merger. The Canadian cannabis sector is in need of consolidation due to the oversupply problems and “historically low flower retail prices,” he explained.

What’s Next

According to Zuanic, Tilray and Aphria merger “makes sense” and the analyst notes there could be various benefits to both sets of shareholders:

• The combined company could account for 19% of recreational market share, which is almost double the next company in line — Canopy Growth with 10.2%;
• Projected synergies of $100 million being equivalent to 14% of combined company sales;
• A fantastic abundance of international assets.

What’s more, Zuanic trusts other mergers could follow in the Canadian cannabis market.

Price Action

As of Wednesday morning, Tilray shares surged 23% reaching $9.68 per share, while Aphria shares were trading 2.71% higher at $8.34.