Last year saw the legal marijuana industry take steps that had never been taken before. More specifically, our neighbor to the north, Canada, legalized recreational cannabis, becoming the first industrialized country and only the second country in the world other than Uruguay to have done so.
More so than just bringing in billions of dollars in added annual revenue in the years to come, the passage of the Cannabis Act in June and the official legalization date of adult-use pot on Oct. 17, 2018 made the weed industry a legitimate business model. In other words, cannabis is no longer considered taboo, and the red carpet has been rolled out for investors big and small…
Dealmaking was on the docket in 2018
With the pot industry gaining validity, another trend we witnessed in 2018 was dealmaking. Lots and lots of dealmaking.
One culprit, if you will, is Aurora Cannabis (NYSE:ACB). When 2018 began, Aurora’s peak annual capacity looked to be a little over 100,000 kilograms. But by year’s end, Aurora was on track for possibly 700,000 kilograms in annual output within the next few years. The company accomplished this surge in capacity with organic projects, partnerships, and a lot of acquisitions.
It began early in the year when Aurora agreed to buy Saskatchewan-based CanniMed Therapeutics. CanniMed added modest production capacity for Aurora but it was more important given its diversified, high-margin product line and softgel capsule products. In July, the company gobbled up MedReleaf for $2.5 billion, tacking on an additional 140,000 kilograms in peak annual yield, with the potential to construct another facility on 95 owned acres adjacent to MedReleaf’s Exeter facility. More recently, Aurora Cannabis closed on its purchase of South America’s ICC Labs for $221 million. ICC has a bounty of available acreage that could be used for capacity expansion.
There were also product deals aplenty. In early August, Molson Coors Brewing Co. (NYSE:TAP) announced a joint venture with HEXO (NASDAQOTH:HYYDF) to develop cannabis-infused beverages. The deal leverages HEXO’s knowledge of the cannabis industry with Molson Coors’ deep pockets and marketing prowess. Of course, Molson Coors and HEXO are at the mercy of the Canadian Parliament since cannabis-infused beverages aren’t yet legal, although…
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