This cannabis giant has European targets in its sights ahead of U.S. legalization frenzy

This cannabis giant has European targets in its sights ahead of U.S. legalization frenzy

By Jack Denton

Cannabis deals in Europe will help pot giant Aphria build up a war chest ahead of an expected frenzy of mergers and acquisitions in the U.S., the company’s chair and chief executive told Barron’s ahead of the group’s earnings on Monday.

High-margin medical cannabis agreements in Europe represent critical waypoints on Aphria’s road to conquer the U.S., bolstering the company’s balance sheet and putting it on firm footing with European regulators, said Irwin Simon.  

As in the U.S., legal recreational cannabis remains on the horizon in Europe, where a combined population of more than 500 million in the U.K. and European Union makes it a lucrative proposition.

Aphria is set to complete its merger with Tilray this quarter, creating the world’s largest cannabis company by revenue. The combined company will push into the U.K., Sweden, Poland, Luxembourg, and China, with deal discussions ongoing in India, Aphria said.

The expansion in Europe will come in a few weeks at the earliest, when Tilray will begin distributing in Luxembourg, with Aphria and Tilray businesses pushing into Poland by the third quarter of this year. 

In China, the group will have a distribution agreement for wellness products with CBD—a non-psychoactive chemical in cannabis that is used to treat pain and anxiety, among other conditions. A similar agreement is under development in India.

Aphria is a key player in global cannabis with a market capitalization of $5.1 billion. The group is favored among analysts for being the first Canadian cannabis company to report a net profit. In December, Aphria agreed to combine with smaller rival Tilray, which has a market cap of $3.5 billion, through a reverse takeover.

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