As the legal cannabis industry matures, consolidation should be expected as companies look to join forces to capture market share. Ahead of Thursday’s opening bell, Hiku Brands Company (CSE: HIKU) and WeedMD Inc. (TSX-V: WMD)(OTC: WDDMF) took that leap, jointly disclosing that the two companies will merge to create a vertically integrated cannabis company.
Toronto-based Hiku Brands itself was the product of a merger in January, formed through the combination of DOJA Cannabis Company and Tokyo Smoke (formally known as TS Brandco Holdings). Hiku has built a portfolio of premium cannabis brands, including the popular Tokyo Smoke, retail locations, Van der Pop's female-focused educational platforms and a licensed cannabis production facility. As it was, Hiku was already vertically integrated.
With the merger with WeedMD, a stronger entity is forged.
From its headquarters in Aylmer, Ontario, about 40 kilometres southeast of London, Weed MD is the parent of WeedMD Rx, Inc., a licensed producer and distributor of medical cannabis and oils under Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR).
The company has a 26,000-square-foot indoor facility in Aylmer and is currently awaiting another cultivation license for its larger greenhouse facility in Strathroy, Ontario that will give WeedMD Rx a total of 610,000 square feet of indoor grow area. The new license and expansion will bolster WeedMD’s cannabis production capacity from 1,500 kilograms to in excess of 50,000 kilograms.
Per the deal, WeedMD shareholders will receive 1.4185 Hiku common shares for each share of WMD owned, representing a value of $2.52 per share based upon closing prices of the stocks on Wednesday. That’s a 60% premium to WMD’s $1.58 close yesterday. Shares of HIKU closed at $1.78 Wednesday on the Canadian Securities Exchange. It’s expected that the combined company will trade on the Toronto Venture Exchange.
Both boards have approved the agreement, which now will go before WeedMD shareholders where it must garner approval from two-thirds of the votes cast.
