Tilray stock climbs as medical cannabis producer Tilray Inc. (NASDAQ:TLRY) enters the hemp industry with a massive acquisition of Manitoba Harvest. TLRY is up 0.72% and selling for $77.95 USD at the time of writing.
The day is still young, though, and the deal offers Tilray what it's been after: entry into the huge US Hemp market.
Tilray Stock: Growth Ahead?
The deal is the largest acquisition in Tilray's history. Paying out $419 million CAD for Manitoba Harvest, it has cemented its move into the hemp industry. Importantly, the deal gives Tilray Inc a foothold in the US hemp-derived CBD market, and this offers great potential for Tilray stock investors.
Manitoba Harvest
Winnipeg-based Manitoba Harvest is, according to the company, the largest vertically-integrated hemp food producer in the world. The company supplies roughly 16,000 retail stores across North America, and these include some of the biggest names such as Walmart, Costco, and Amazon.
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Looking at some numbers, according to Seeking Alpha:
"Manitoba Harvest reported sales of $94 million CAD in 2018 which implies a price of 4.5x revenue for Tilray's purchase. Tilray clearly paid up for this asset."
But it was a necessary price to pay to catch up with its peers and Tilray stock will hopefully skyrocket on this acquisition.
Tilray and Hemp
Thus far, the only hemp-related move Tilray has made has been a deal with Authentic Brands Group (ABG) in January 2019. In this case, Tilray is set to pay $350 million to ABG for 49% of revenues from selling AGB-branded CBD products.
A good move forward but not enough as Tilray still didn't have the production and processing capabilities akin to some of its peers. But with Manitoba Harvest on board, the company now has all it needs to truly capitalize on the burgeoning hemp-CBD market. Moving into the US hemp market should mean an opportunity for Tilray stock.
What do you think? Are you happy about this deal? Do you think Tilray stock will climb further in the days to come?
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