Cannabis News

When Cannabis 2.0 launched in Canada with the sale of cannabis edibles, beverages and vape products, Marshall Posner, chief marketing officer for vertically integrated licensed producer Delta 9, said the company wanted to do more to ensure cannabis packaging and waste was being dealt with responsibly.

While packaging for dried flower and other cannabis products can generally be recycled as part of Canada’s Blue Box recycling program, many vape products are designated as special waste and cannot be recycled in the same way, meaning that they often end up in landfills.

“As we’ve seen these products become more prevalent in our stores, we felt we needed to do something in a responsible fashion to help address … where this packaging and cannabis waste is ending up,” Posner told Cannabis Business Times and Cannabis Dispensary.

This led Delta 9 to partner with Canadian recycling company Emterra Environmental to create a sustainable recycling program for cannabis packaging and disposable vape pens, as well as a landfill diversion program for vape cartridges, to help the Canadian cannabis industry transition to a circular economy.

Emterra Environmental was founded 44 years ago as a Vancouver-based recycling company.

“Unlike some of our industry peers, we don’t see ourselves as a waste disposal company or a landfill operator,” said Paulina Leung, VP of corporate strategy and business development for Emterra Environmental. Her mother started the company, which has since grown to 1,100 employees, 15 recycling plants and over 800 trucks. “Our true core is to be a recycler and to help ensure any kind of material we extract from the earth gets to be used over and over again.”

Emterra Environmental has moved beyond its initial role as a recycling and waste management company, Leung said, and now works directly with companies, such as Delta 9, that want to take responsibility for their products and work to increase sustainability in the marketplace.

“That’s where we have a similar ethos with Delta 9,” Leung said. “We’re both vertically integrated companies in our respective industries, and instead of waiting for government to tell us what to do with cannabis packaging and vape products, we found each other and we created this customer program … to help Delta 9 continue to grow in a sustainable way.”

Delta 9 launched in 2013 as one of Canada’s original LPs, and currently operates eight retail stores across Manitoba, Alberta and Saskatchewan in addition to its cultivation operations. The company will open a ninth store next week and aims to open another 11 retail locations by the end of 2021.

“We think of ourselves as a socially responsible company, and we’ve participated in a variety of green initiatives or recycling programs that the industry has started and stopped over the past year and a half,” Posner said. “We were excited about this and it seemed like a good fit for us to restart or relaunch a new program that would ultimately be sustainable for the industry.”

Leung added: “We saw other programs in the industry come and go, and in seeing those programs come and go, we saw that there were opportunities and ways to make our program more effective, more efficient, and also more authentic.”

The first component of the program allows consumers to recycle cannabis packaging similar to Canada’s well-established Blue Box program, while a second component focuses on landfill diversion for disposable vape cartridges and vape pens.

“Of course, landfilling is absolutely the worst,” Leung said. “Things stay in landfills forever—it never decomposes. So, the second option was to recover the energy from the cartridges. That’s what makes our program unique.”

The program accepts cannabis packaging and disposable vape cartridges and vape pens from any licensed producer, regardless of brand. Consumers can simply bring their empty containers and vape products to any Delta 9 retail location and deposit them into boxes labeled “Flower – Recycling” or “Vapes – Landfill Diversion.”

Consumers are asked to wrap the vape cartridges in individual bags before putting them into the box to make it easier for the recycler to sort the cartridges from the pens, which ultimately increases recyclability, Leung said.

The contents of the flower recycling box will be picked up and delivered to ReVital Polymers’ plastics recycling facility in Sarnia, Ontario, where post-consumer plastics are processed into engineered resin products.

The collected vape pens and vape cartridges are processed at Emterra Environmental’s partner electronics recycling facility, where the pens are separated from the cartridges for processing. The battery, plastic and metal are recovered from the vape pens, while the cartridges are handled as special waste and sent to an energy-from-waste facility for processing. All of this happens domestically in Canada, and no waste is shipped abroad.

“When the recycling is full on our end, there’s a bag inside,” Posner said. “We take it, put it in a box and book a pick-up online from Canada Post, and that’s it. It’s a real simple process. I think that’s what I really like about this program. If you look at successful programs, they’re really quite simple. There aren’t all of these steps that you have to adhere to.”

Emterra Environmental and Delta 9 have created educational Q&As to display on their websites and in-store to help both consumers and Delta 9’s retail staff understand the process and why it is important.

In the several days since the program’s launch, online and in-store response has been positive, Posner said.

“Our customers have been asking us for months when we’ll be introducing vape recycling or some kind of a vape program or … recycling program for cannabis packaging,” he said. “I think for a lot of them, they’re like, ‘Oh, good, it’s about time.’”

The long-term success of any diversion program requires the industry to participate, Leung added, and she and Posner hope that other LPs will take notice and join in.

“Delta 9 certainly led this initiative and I really hope they have set the example and other LPs will join because when industry acts as a whole, not only will the program be more cost-effective for everybody, but it will also show government that they don’t need to regulate the industry from a waste management perspective,” Leung said. “Industry is taking responsibility for the end-of-life management of cannabis and vape products and packaging, they’re being proactive, and I think government appreciates that. From a compliance or government affairs perspective and from achieving a cost-effective program, industry working together will result in the best outcome for all the players.”

Creating packaging with circular end-of-life solutions is not a competitive issue, she added, and should instead be something that the entire industry collaboratively addresses.

“As soon as Marshall and I started talking, it was very like-minded,” Leung said. “We saw that the industry is growing very quickly, and sometimes when an industry is growing very quickly, some of the elements of sustainability take a while to catch up. … I hope this is a launching pad for a nationwide program that will be able to manage all the cannabis packaging, as well as the vape pens and the vape cartridges. … I really hope that the industry hears this call to action and works together.”

The partnership between Delta 9 and Emterra Environmental relies on shared expenses, which will ultimately contribute to the long-term viability of the program, Posner said.

“The packaging is as diverse as the types of products that are held in them, and on the spectrum of really recyclable to terrible [and] not recyclable, the packaging will fall anywhere on that spectrum,” Leung said. “What we want to do in this program is to take a look at each brand and each type of packaging available and to be able to give some analysis and recommendations to the LPs to say, ‘This type of packaging is really good—can you transition more of your packaging to this type?’ Then, we’ll also be honest and say, ‘This type of packaging is not good, so can we work together and find some other alternatives?’”

“This was important to our employees, it’s important to our customers, and quite frankly, we think it’s a responsibility of any company,” Posner added. “Whether [it’s] a cannabis company or another that is producing waste and putting waste into the marketplace, [it should] have a solution on the backend or at least contribute to a solution on the backend to help deal with the waste.”

2020 was a big year for the cannabis industry as four states—Arizona, Montana, New Jersey and South Dakota—legalized adult-use in the general election, potentially setting the stage for more states to legalize in 2021. Voters also ushered in medical cannabis in South Dakota, marking the first-time both adult-use and medical legalization were approved in the same election, and medical cannabis in Mississippi also passed. 

And, there is evidence that this momentum will influence more states to come online in 2021. Here, we look at the states most likely to legalize as we head into the New Year.

Connecticut

Gov. Ned Lamont renewed his legalization push at the beginning of 2020, with the introduction of a bill that would have legalized adult-use for Connecticuters 21 and older, tested for impaired drivers, and supported racial and ethnic minorities in their participation in the market.

While that legislation, S.B. 16, ultimately stalled in committee, Lamont has said he will try again in 2021, according to a Patch.com report, especially since nearby New Jersey has legalized.

State House Democrats have vowed to vote on legalization in 2021, according to NBC Connecticut, in part because of the growing number of nearby states with regulated adult-use markets, as well as a projected state budget deficit heading into next year.

New Mexico

Gov. Michelle Lujan Grisham called for a renewed push for adult-use legalization in 2020 and even added the issue to the state’s legislative agenda. Lawmakers took notice and introduced legislation to get the job done, and the Senate Public Affairs Committee even approved the bill before the Senate Judiciary Committee ultimately voted in February to table the legislation.

As 2020 came to a close, the Albuquerque Journal reported that proponents of legalization were hopeful that 2021 could be their year, as several influential legislative opponents were defeated in the general election, improving a bill’s chances of making it through the Senate.

Rep. Javier Martinez (D-Albuquerque) has announced plans to introduce a new legalization proposal during New Mexico’s 60-day legislative session, which kicks off in January, according to the Albuquerque Journal.

New York

Gov. Andrew Cuomo also went into 2020 with plans for cannabis legalization, and included an adult-use proposal in his state budget this past January. Before the COVID-19 pandemic reached the U.S., Cuomo announced plans to tour legal cannabis states as part of his legalization push to learn which aspects of their cannabis programs have worked and which have not.

As the pandemic raged on, though, Cuomo cut his legalization proposal from the budget, saying that there was “too much” to accomplish and “too little time” ahead of an April 1 deadline to approve the sprawling budget.

An October interview between Axel Bernabe, one of Cuomo’s advisers, and David Culver, an executive with Canopy Growth, revealed that Cuomo is already renewing his legalization push heading into 2021, with plans to again include adult-use legalization in New York’s 2021-2022 budget.

Pennsylvania

As the state continues to grapple with the economic fallout of the COVID-19 pandemic, Gov. Tom Wolf has called for adult-use cannabis legalization to help boost Pennsylvania’s economy. Wolf’s legalization push has been met with mixed reactions from industry stakeholders, however, with some skeptical about a legalization bill clearing the Republican-controlled legislature.

Still, Lt. Gov. John Fetterman has also expressed support for adult-use legalization to help combat the state’s budget deficit, and some of Pennsylvania’s state senators have also thrown their support behind legalization to lessen the blow of the economic shortfall.

Rhode Island

Like Cuomo, Rhode Island Gov. Gina Raimondo included an adult-use cannabis legalization proposal in her state budget plan at the start of 2020, but Senate leadership opposed the plan, which was ultimately tabled.

During the November Senate Democratic caucus, however, lawmakers seemed more receptive to legalization to counteract the economic fallout from the COVID-19 pandemic, and are now considering Raimondo’s proposal as they work on the budget heading into 2021.

Texas

State lawmakers have pre-filed several bills that would expand Texas’ medical cannabis program and legalize adult-use ahead of the 2021 session that kicks off in January. Among the legislation is Rep. Roland Gutierrez’s S.B. 140, which would legalize adult-use and which Gutierrez says would create 30,000 new jobs and more than $3 billion in revenue.

Virginia

Gov. Ralph Northam signed a cannabis decriminalization bill into law this past spring, effectively reclassifying the possession of one ounce of cannabis or less to a civil penalty punishable by a fine of up to $25. Now, heading into the New Year, Northam has announced plans to introduce an adult-use legalization bill when the General Assembly reconvenes in January.

In addition, the Virginia Marijuana Legalization Work Group, which was created by the decriminalization measure to study adult-use legalization and made up of community leaders, healthcare professionals, policy experts and members of Northam’s administration, released its recommendations Nov. 30. In a roughly 400-page report, the work group outlined guidelines for taxation, banking, criminal justice, licensing, regulation and consumer safety.

Separately, the Joint Legislative Audit & Review Commission has released its own study on the potential impacts of legalization in the state, and has found that legalization could generate more than $300 million in annual tax revenues by the fifth year of the program, reduce cannabis-related arrests by 84% when combined with decriminalization, and create more than 11,000 jobs in Virginia.

Lawmakers in the House of Delegates have said that legislation to legalize cannabis would likely pass that chamber, according to The Virginia Mercury, while Senate Majority Leader Dick Saslaw has said that the issue would have “slightly better than 50-50 odds” in that chamber.

2020 was a big year for the cannabis industry as four states—Arizona, Montana, New Jersey and South Dakota—legalized adult-use in the general election, potentially setting the stage for more states to legalize in 2021. Voters also ushered in medical cannabis in South Dakota, marking the first-time both adult-use and medical legalization were approved in the same election, and medical cannabis in Mississippi also passed. 

And, there is evidence that this momentum will influence more states to come online in 2021. Here, we look at the states most likely to legalize as we head into the New Year.

Connecticut

Gov. Ned Lamont renewed his legalization push at the beginning of 2020, with the introduction of a bill that would have legalized adult-use for Connecticuters 21 and older, tested for impaired drivers, and supported racial and ethnic minorities in their participation in the market.

While that legislation, S.B. 16, ultimately stalled in committee, Lamont has said he will try again in 2021, according to a Patch.com report, especially since nearby New Jersey has legalized.

State House Democrats have vowed to vote on legalization in 2021, according to NBC Connecticut, in part because of the growing number of nearby states with regulated adult-use markets, as well as a projected state budget deficit heading into next year.

New Mexico

Gov. Michelle Lujan Grisham called for a renewed push for adult-use legalization in 2020 and even added the issue to the state’s legislative agenda. Lawmakers took notice and introduced legislation to get the job done, and the Senate Public Affairs Committee even approved the bill before the Senate Judiciary Committee ultimately voted in February to table the legislation.

As 2020 came to a close, the Albuquerque Journal reported that proponents of legalization were hopeful that 2021 could be their year, as several influential legislative opponents were defeated in the general election, improving a bill’s chances of making it through the Senate.

Rep. Javier Martinez (D-Albuquerque) has announced plans to introduce a new legalization proposal during New Mexico’s 60-day legislative session, which kicks off in January, according to the Albuquerque Journal.

New York

Gov. Andrew Cuomo also went into 2020 with plans for cannabis legalization, and included an adult-use proposal in his state budget this past January. Before the COVID-19 pandemic reached the U.S., Cuomo announced plans to tour legal cannabis states as part of his legalization push to learn which aspects of their cannabis programs have worked and which have not.

As the pandemic raged on, though, Cuomo cut his legalization proposal from the budget, saying that there was “too much” to accomplish and “too little time” ahead of an April 1 deadline to approve the sprawling budget.

An October interview between Axel Bernabe, one of Cuomo’s advisers, and David Culver, an executive with Canopy Growth, revealed that Cuomo is already renewing his legalization push heading into 2021, with plans to again include adult-use legalization in New York’s 2021-2022 budget.

Pennsylvania

As the state continues to grapple with the economic fallout of the COVID-19 pandemic, Gov. Tom Wolf has called for adult-use cannabis legalization to help boost Pennsylvania’s economy. Wolf’s legalization push has been met with mixed reactions from industry stakeholders, however, with some skeptical about a legalization bill clearing the Republican-controlled legislature.

Still, Lt. Gov. John Fetterman has also expressed support for adult-use legalization to help combat the state’s budget deficit, and some of Pennsylvania’s state senators have also thrown their support behind legalization to lessen the blow of the economic shortfall.

Rhode Island

Like Cuomo, Rhode Island Gov. Gina Raimondo included an adult-use cannabis legalization proposal in her state budget plan at the start of 2020, but Senate leadership opposed the plan, which was ultimately tabled.

During the November Senate Democratic caucus, however, lawmakers seemed more receptive to legalization to counteract the economic fallout from the COVID-19 pandemic, and are now considering Raimondo’s proposal as they work on the budget heading into 2021.

Texas

State lawmakers have pre-filed several bills that would expand Texas’ medical cannabis program and legalize adult-use ahead of the 2021 session that kicks off in January. Among the legislation is Rep. Roland Gutierrez’s S.B. 140, which would legalize adult-use and which Gutierrez says would create 30,000 new jobs and more than $3 billion in revenue.

Virginia

Gov. Ralph Northam signed a cannabis decriminalization bill into law this past spring, effectively reclassifying the possession of one ounce of cannabis or less to a civil penalty punishable by a fine of up to $25. Now, heading into the New Year, Northam has announced plans to introduce an adult-use legalization bill when the General Assembly reconvenes in January.

In addition, the Virginia Marijuana Legalization Work Group, which was created by the decriminalization measure to study adult-use legalization and made up of community leaders, healthcare professionals, policy experts and members of Northam’s administration, released its recommendations Nov. 30. In a roughly 400-page report, the work group outlined guidelines for taxation, banking, criminal justice, licensing, regulation and consumer safety.

Separately, the Joint Legislative Audit & Review Commission has released its own study on the potential impacts of legalization in the state, and has found that legalization could generate more than $300 million in annual tax revenues by the fifth year of the program, reduce cannabis-related arrests by 84% when combined with decriminalization, and create more than 11,000 jobs in Virginia.

Lawmakers in the House of Delegates have said that legislation to legalize cannabis would likely pass that chamber, according to The Virginia Mercury, while Senate Majority Leader Dick Saslaw has said that the issue would have “slightly better than 50-50 odds” in that chamber.

2020 was a big year for the cannabis industry as four states—Arizona, Montana, New Jersey and South Dakota—legalized adult-use in the general election, potentially setting the stage for more states to legalize in 2021. Voters also ushered in medical cannabis in South Dakota, marking the first-time both adult-use and medical legalization were approved in the same election, and medical cannabis in Mississippi also passed. 

And, there is evidence that this momentum will influence more states to come online in 2021. Here, we look at the states most likely to legalize as we head into the New Year.

Connecticut

Gov. Ned Lamont renewed his legalization push at the beginning of 2020, with the introduction of a bill that would have legalized adult-use for Connecticuters 21 and older, tested for impaired drivers, and supported racial and ethnic minorities in their participation in the market.

While that legislation, S.B. 16, ultimately stalled in committee, Lamont has said he will try again in 2021, according to a Patch.com report, especially since nearby New Jersey has legalized.

State House Democrats have vowed to vote on legalization in 2021, according to NBC Connecticut, in part because of the growing number of nearby states with regulated adult-use markets, as well as a projected state budget deficit heading into next year.

New Mexico

Gov. Michelle Lujan Grisham called for a renewed push for adult-use legalization in 2020 and even added the issue to the state’s legislative agenda. Lawmakers took notice and introduced legislation to get the job done, and the Senate Public Affairs Committee even approved the bill before the Senate Judiciary Committee ultimately voted in February to table the legislation.

As 2020 came to a close, the Albuquerque Journal reported that proponents of legalization were hopeful that 2021 could be their year, as several influential legislative opponents were defeated in the general election, improving a bill’s chances of making it through the Senate.

Rep. Javier Martinez (D-Albuquerque) has announced plans to introduce a new legalization proposal during New Mexico’s 60-day legislative session, which kicks off in January, according to the Albuquerque Journal.

New York

Gov. Andrew Cuomo also went into 2020 with plans for cannabis legalization, and included an adult-use proposal in his state budget this past January. Before the COVID-19 pandemic reached the U.S., Cuomo announced plans to tour legal cannabis states as part of his legalization push to learn which aspects of their cannabis programs have worked and which have not.

As the pandemic raged on, though, Cuomo cut his legalization proposal from the budget, saying that there was “too much” to accomplish and “too little time” ahead of an April 1 deadline to approve the sprawling budget.

An October interview between Axel Bernabe, one of Cuomo’s advisers, and David Culver, an executive with Canopy Growth, revealed that Cuomo is already renewing his legalization push heading into 2021, with plans to again include adult-use legalization in New York’s 2021-2022 budget.

Pennsylvania

As the state continues to grapple with the economic fallout of the COVID-19 pandemic, Gov. Tom Wolf has called for adult-use cannabis legalization to help boost Pennsylvania’s economy. Wolf’s legalization push has been met with mixed reactions from industry stakeholders, however, with some skeptical about a legalization bill clearing the Republican-controlled legislature.

Still, Lt. Gov. John Fetterman has also expressed support for adult-use legalization to help combat the state’s budget deficit, and some of Pennsylvania’s state senators have also thrown their support behind legalization to lessen the blow of the economic shortfall.

Rhode Island

Like Cuomo, Rhode Island Gov. Gina Raimondo included an adult-use cannabis legalization proposal in her state budget plan at the start of 2020, but Senate leadership opposed the plan, which was ultimately tabled.

During the November Senate Democratic caucus, however, lawmakers seemed more receptive to legalization to counteract the economic fallout from the COVID-19 pandemic, and are now considering Raimondo’s proposal as they work on the budget heading into 2021.

Texas

State lawmakers have pre-filed several bills that would expand Texas’ medical cannabis program and legalize adult-use ahead of the 2021 session that kicks off in January. Among the legislation is Rep. Roland Gutierrez’s S.B. 140, which would legalize adult-use and which Gutierrez says would create 30,000 new jobs and more than $3 billion in revenue.

Virginia

Gov. Ralph Northam signed a cannabis decriminalization bill into law this past spring, effectively reclassifying the possession of one ounce of cannabis or less to a civil penalty punishable by a fine of up to $25. Now, heading into the New Year, Northam has announced plans to introduce an adult-use legalization bill when the General Assembly reconvenes in January.

In addition, the Virginia Marijuana Legalization Work Group, which was created by the decriminalization measure to study adult-use legalization and made up of community leaders, healthcare professionals, policy experts and members of Northam’s administration, released its recommendations Nov. 30. In a roughly 400-page report, the work group outlined guidelines for taxation, banking, criminal justice, licensing, regulation and consumer safety.

Separately, the Joint Legislative Audit & Review Commission has released its own study on the potential impacts of legalization in the state, and has found that legalization could generate more than $300 million in annual tax revenues by the fifth year of the program, reduce cannabis-related arrests by 84% when combined with decriminalization, and create more than 11,000 jobs in Virginia.

Lawmakers in the House of Delegates have said that legislation to legalize cannabis would likely pass that chamber, according to The Virginia Mercury, while Senate Majority Leader Dick Saslaw has said that the issue would have “slightly better than 50-50 odds” in that chamber.

In a press release sent out earlier this month, the Washington State Liquor and Cannabis Board (WSLCB) announced they have shut down Praxis Laboratory for falsifying test results. The WSLCB, the state regulatory agency overseeing Washington’s cannabis industry, said that Praxis inflated data for potency test results on more than 1200 samples, giving samples higher THC levels than the state actually found.

A google search revealed the laboratory has since shut down their website. A message appears when you go to their website: “This site is currently undergoing maintenance. Please check back later.”

Praxis Laboratory, located in Centralia, Washington, is also accused of interfering with the investigation. “During the investigation the lab owner attempted to destroy evidence of falsified data in an effort to obstruct LCB’s ability to conduct a complete investigation,” reads the press release. “Labeling cannabis with falsely high THC potency levels is a form of consumer deception and is prohibited under Washington law.”

The WSLCB has state authority to take actions like license suspensions when licensees operate illegally. The suspension lasts for six months, during which time the WSLCB will “seek permanent revocation” of the lab’s license to operate, due to fraud and obstruction during the investigation.

Leamington, Ontario and Nanaimo, British Columbia – December 16, 2020 – PRESS RELEASE – Aphria Inc., a global cannabis company, and Tilray, Inc., a cannabis research, cultivation, production and distribution company, today announced that they have entered into a definitive agreement to combine their businesses and create the world’s largest global cannabis company based on pro forma revenue. The deal is pursuant to a plan of arrangement under the Business Corporations Act, and the implied pro forma equity value of the combined company is approximately C$5.0 billion, based on the share price of Aphria and Tilray at the close of market on Dec. 15, 2020. Following the completion of the arrangement, the combined company will have principal offices in the United States (New York and Seattle), Canada (Toronto, Leamington and Vancouver Island), Portugal and Germany, and it will operate under the Tilray corporate name with shares trading on NASDAQ under ticker symbol “TLRY.”

The combined company, supported by low-cost, state-of-the-art cultivation, processing and manufacturing facilities, will have a complete portfolio of branded Cannabis 2.0 products in Canada. Internationally, the combined company will be well-positioned to pursue growth opportunities with Aphria’s medical cannabis and distribution footprint in Germany, and Tilray’s European Union Good Manufacturing Practices (EU-GMP) low-cost cannabis production facility in Portugal, which has export capabilities and tariff-free access to the European Union (EU) to meet increasing global demand for medical cannabis. In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater Brewing Company, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a leading hemp food manufacturer and a pioneer in branded CBD and wellness products. The combined company is expected to have a strong, flexible balance sheet, cash balance and access to capital giving it the ability to accelerate growth and deliver attractive returns for stockholders.

Under the terms of the arrangement, the shareholders of Aphria will receive 0.8381 shares of Tilray for each Aphria common share, while holders of Tilray shares will continue to hold their Tilray shares with no adjustment to their holdings. Upon the completion of the arrangement, Aphria Shareholders will own approximately 62% of the outstanding Tilray Shares on a fully diluted basis, resulting in a reverse acquisition of Tilray, representing a premium of 23% based on the share price at market close on Dec. 15, 2020 to Tilray shareholders. On a pro forma basis for the last twelve months reported by each company, the combined company would have had revenue of C$874 million (US$685 million).

Proven Leadership Team

The combined company will be led by a best-in-class management team and board of directors, with strong track records in consumer-packaged goods and cannabis experience internationally. Upon completion of the arrangement, Aphria’s current Chairman and Chief Executive Officer Irwin D. Simon will lead the combined company as chairman and chief executive officer. The board of directors will consist of nine members, seven of which, including Simon, are current Aphria directors and two of which will be from Tilray, including Brendan Kennedy, and one of which is to be designated. Aphria and Tilray are confident that the leadership team and proposed board of directors of the combined company provides a strong foundation for the combined company to accelerate growth. Additional senior leadership positions at the combined company will be named at a later date.

“This is an exciting day for both companies including our 2,500 employees, for the cannabis industry, and for patients and consumers around the world. We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S. and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital,” said Simon. “Our highly complementary businesses create a combined company with a leading branded product portfolio, including the most comprehensive Cannabis 2.0 product offerings for patients and consumers, along with significant synergies across our operations in Canada, Europe and the United States. Our business combination with Tilray aligns with our strategic focus and emphasis on our highest return priorities as we strive to generate value for all stakeholders.

“I am honored to work with Brendan Kennedy, a pioneer in the cannabis industry, and the Tilray team as they join forces with our talented employees at Aphria,” continued Simon. “I look forward to leading the talented teams of both Aphria and Tilray as we seek to create a leading global cannabis and consumer packaged goods company with a portfolio of medical, wellness and adult-use brands consumers love.”

Kennedy, Tilray’s chief executive officer, commented, “We are thrilled to bring together two cannabis industry leaders. At this nascent stage of development and expansion of the global cannabis market, we believe companies with leading geographic scale, product range and brand expertise are most likely to benefit long-term. By leveraging our combined strengths and capabilities, we expect to be able to meet the needs of consumers more effectively all over the world and advance patient care. With a strong financial profile, low-cost production, leading brands, distribution network and unique partnerships, we believe the combined company will be well-positioned to deliver sustainable, attractive returns for stockholders. I look forward to working with Irwin and the combined company’s management team to make our consumer products more accessible around the world.”

Strategic and Financial Benefits

The combined company will be the largest global cannabis company based on pro forma revenue for the last twelve months reported by each company with scale and breadth across major geographies and a complete portfolio of market leading brands in the major Cannabis 2.0 product categories. Aphria and Tilray each believe the business combination pursuant to the arrangement will provide the following financial and strategic benefits, among others:

• Financial Strength and Flexibility: The combined company will enjoy an attractive financial profile with pro forma revenue of C$874 million (US$685 million) for the last twelve months reported by each company, the highest in the global cannabis industry. In Canada, the combination of Aphria and Tilray will create the leading adult-use cannabis company with gross revenue of C$296 million (US$232 million) in the adult-use market for the twelve months reported by each company. Aphria has generated positive adjusted EBITDA over the last six quarters, which in combination with the synergies to be realized, provides a robust platform for future profitability and cash flow generation for the combined company. This, collectively with the strength of the combined company’s balance sheet and access to capital, is expected to help accelerate global growth and value for the combined company’s stakeholders.
• Creates the Leading Canadian Adult-Use Cannabis Licensed Producer: Together, Aphria and Tilray will be the leading adult-use cannabis Canadian Licensed Producer based on revenue for the last 12 months by combining their respective brands, distribution networks and world-class facilities. In Canada’s C$3.1 billion adult-use, retail market, the combined company will have one of the lowest cost production operations with its state-of-the-art facilities. In addition, the combined company will have a portfolio of carefully curated brands across all consumer segments that are sold through its distribution partners. On a pro forma basis, for the period August to October 2020, the combined company would have held a 17.3% retail market share, the largest share held by any single Licensed Producer in Canada and 700 basis points higher than the next closest competitor.
• Increases Product Breadth and Commitment to Innovation: Leveraging both Aphria and Tilray’s commitment and culture of innovation and brand building, the combined company will serve clients with a complete portfolio of Cannabis 2.0 products and sales and service infrastructure supported by leading distribution partners. Aphria and Tilray’s complementary brands will be available across economy, value, core, premium and premium plus product offerings. In addition, the combined company will have a complete breadth of products in every major cannabis category, including flower, pre-roll, oils, capsules, vapes, edibles and beverages.
• Establishes an Unrivaled European Platform: The combined company will be well-positioned to pursue growth opportunities with its end-to-end EU-GMP supply chain and distribution, which includes Aphria’s German medical cannabis distribution footprint and Tilray’s 2.7-million-square-foot European EU-GMP low-cost cannabis cultivation and production facility in Portugal. In Germany, Aphria’s wholly-owned subsidiary, CC Pharma GmbH, will provide the combined company with distribution capabilities for the Aphria and Tilray medical cannabis brands to more than 13,000 pharmacies. In Portugal, Tilray’s EU-GMP cultivation and production facility will provide the combined company with the capacity to cultivate and produce medical cannabis products in order to meet international demand and has export capabilities, which provides tariff-free access to the EU.
• Enhances Consumer Packaged Goods Presence and Infrastructure in the U.S.: In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. The combined company is expected to leverage SweetWater’s craft beer manufacturing and distribution network to build brand awareness for the combined company’s brands via craft beers, hard seltzers and other beverages as it seeks to take advantage of opportunities for both the adult-use and health and wellbeing beverage trends. The combined company also expects to pursue the opportunity to expand with new or existing CBD or other cannabinoid brands leveraging Manitoba Harvest’s strong hemp and wellness product platform. When U.S. regulations allow, the combined company expects to be well-positioned to compete in the U.S. cannabis market given its existing strong brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis.
• Positions Combined Company to Continue to Grow in the Beverage Segment: The combined company believes it will be well-positioned to pursue an accelerated rate of growth in the Canadian and the U.S. beverage industries by leveraging SweetWater’s innovation, knowledge and expertise to introduce adult-use cannabis brands via craft beers and other beverages. This includes leveraging Aphria and Tilray’s proven distribution networks in Canada to sell SweetWater’s 420 cannabis lifestyle brand in Canada.
• Substantial Synergies: The combination of Aphria and Tilray is expected to deliver approximately C$100 million of annual pre-tax cost synergies within 24 months of the completion of the transaction. The combined company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses. This is expected to include the opportunity for Aphria’s Leamington, Ontario operations to provide additional volume for Tilray’s brands and to replace the need for Tilray to use wholesale cannabis purchases from other licensed producers. Tilray’s London, Ontario facility will also provide Aphria with excess capacity to increase production of additional form factors including their branded edibles and beverages.  The combined company is considering utilizing Tilray’s existing Nanaimo, British Columbia facility for Aphria’s premium Broken Coast brand to increasingly meet consumer demand for its products. The combined company plans to capitalize on opportunities for growth through a broadened product offering and additional form factors, with the aim of increasing adult-use cannabis brand availability across certain Canadian provinces to an expanded customer base with the combined company’s scalable infrastructure. Internationally, the combined company will have the opportunity to reach additional pharmacies and patients via distribution relationships. The combination is expected to unlock significant shareholder value.

Agreement Details

Under the terms of the agreement, the arrangement will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) and will require the approval of at least two-thirds of the votes cast by the Aphria Shareholders at a special meeting. Approval of a majority of the votes cast by Tilray stockholders will be required to, among other things contemplated by the agreement, authorize the issuance of Tilray shares to Aphria shareholders pursuant to the arrangement. Following completion of the arrangement, Aphria will become a wholly-owned subsidiary of Tilray, with Aphria shareholders owning approximately 62% of Tilray.

Completion of the arrangement is subject to regulatory and court approvals and other customary closing conditions. Regulatory approvals expected to be required include Competition Bureau (Canada), U.S. HSR and Germany FDI. The agreement includes certain reciprocal customary provisions, including covenants in respect of the non-solicitation of alternative transactions, a right to match superior proposals and C$65 million (US$50 million) reciprocal termination fee payable under certain circumstances. The arrangement is expected to close in the second quarter of calendar year 2021 following the receipt of such regulatory approvals, as well as court approval of the arrangement.

Each of Aphria’s and Tilray’s respective directors and officers and certain principal Tilray Stockholders have entered into voting support agreements agreeing to vote their Aphria Shares or Tilray Shares, as applicable, in favor of the resolutions put before them pursuant to the agreement.

For further information on the terms and conditions of the arrangement, please refer to the agreement in its entirety, which will be available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Full details of the arrangement will be included in a management information circular of Aphria and in a proxy statement of Tilray to be delivered to Aphria Shareholders and the Tilray Stockholders, respectively, in the coming weeks.

Board of Directors’ Approval

Each of Aphria’s and Tilray’s respective board of directors has unanimously approved the agreement and the arrangement. Jefferies LLC provided a fairness opinion to the Board of Directors of Aphria on Dec. 15, 2020, stating that, as of the date of such opinion and based upon the scope of review and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to the Aphria Shareholders. Cowen provided a fairness opinion dated Dec. 15, 2020 to the board of directors of Tilray stating that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to Tilray.

Advisors

Jefferies LLC is serving as financial advisor and DLA Piper LLP (US), DLA Piper (Canada) LLP and Fasken Martineau Dumoulin LLP are acting as legal counsel to Aphria. Cowen is serving as financial advisor and Cooley LLP and Blake, Cassels and Graydon LLP are acting as legal counsel to Tilray.

Conference Call & Webcast Presentation

Aphria and Tilray executives will host a conference call and webcast with a supplemental presentation to discuss the strategic business combination today, Dec. 16, 2020 at 8:30 a.m. Eastern Time.

To listen to the live call, dial (647) 427-7450 from Canada and the U.S. or (888) 231-8191 from international locations and use the passcode 4334816. A telephone replay will be available approximately two hours after the call concludes through January 13, 2021. To access the recording dial (855) 859-2056 and use the passcode 4334816.

There will also be a simultaneous, live webcast and supplemental presentation available on the Investors section of Aphria’s and Tilray’s website at aphriainc.com and Tilray.com. The webcast will be archived for 30 days.

As a strange year heads to a final, painful finish, there have been some major (and some less so) changes afoot in the global world of cannabis regulation. These developments have also undoubtedly been influenced by recent events, such as the recent elections in the United States, state votes for adult use reform in the U.S. and the overall global temperature towards reform. And while all are broadly positive, they have not actually accomplished very much altogether.

Here is a brief overview of the same.

The UN Vote On Cannabis
Despite a wide celebration in the cannabis press, along with proclamations of an unprecedented victory by large Canadian companies who are more interested in keeping their stock prices high than anything else, the December 2 vote on cannabis was actually fairly indecisive.

Following the WHO recommendations to reschedule cannabis, the UN voted in favor of the symbolic move. Despite removing cannabinoids from Schedule IV globally, a regulatory label designed for highly addictive, prescription drugs (like Valium), the actual results on the ground for the average company and patient will be inconclusive.

The first issue is that the UN did not remove cannabinoids themselves, or the plant, from Schedule I designation. This essentially means that countries and regions will be on the front lines to create more local, sovereign policies. This is not likely to change for at least the next several years (more likely decade) as the globe comes to terms with not just a reality post-COVID-19, but one which is very much pro-cannabis.

In the meantime, however, the ruling will make it easier for research to be conducted, for patient access (for the long term), and more difficult for insurers to turn down in jurisdictions where the supposed “danger” of cannabis has been used as an excuse to deny coverage. See Germany as a perfect example of the same.

It is also a boon for the CBD business, no matter where it is. Between this decision and the recent victory in Europe about whether CBD is a narcotic or not (see below), this is another nail in the coffin for those who want to use semantic excuses to restrain the obvious global desire for cannabinoids, with or without THC.

The U.S. Vote On The MORE Act

While undoubtedly a “victory” in the overall cannabis debate, the MORE Act actually means less rather than more. It will not become law as the Senate version of the bill is unlikely to even get to the floor of the chamber before the end of the session – which ends at the end of this year.

That said, the vote is significant in that it is a test of the current trends and views towards big issues within the overall discussion, beginning with decriminalization and a reform of current criminal and social justice issues inherent in the same. The Biden Administration, while plagued with a multitude of issues, beginning with the pandemic and its immediate aftershocks, will not be able to push both off the radar. Given the intersection of minority rights’ issues, the growing legality of the drug and acceptance thereof, as well as the growing non-partisan position on cannabis use of both the medical and adult use kind, and the economy, expect issues like banking to also have a hope of reform in the next several years.

Cannabis may be taking a back seat to COVID, in other words, but as the legalization of the industry is bound up, inextricably, in economic issues now front and center for every economy, it will be in the headlines a great deal. This makes it an unavoidable issue for the majority of the next four years and on a federal level.

Prognosis in other words? It’s a good next federal step that is safe, but far from enough.

The European Commission (EC) Has Finally Seen The Light On CBD

One of the most immediately positive and impactful decisions of the last month was absolutely the EC decision on whether CBD is a narcotic or not.

This combined with the UN rescheduling, will actually be the huge boost the CBD industry has been waiting for here, with one big and still major overhanging caveat – namely whether the plant is a “novel” one or not. It is unlikely as the situation continues to cook, that Cannabis Sativa L, when it hits a court of law, will ever be actually found as such. It has inhabited the region and been used by its residents for thousands of years.

However, beyond this, important regulatory guidance will need to fall somewhere on the matter of processing and extraction. It is in fact in the processing and extraction part of the debate that this discussion about Novel Food actually means something, beyond the political jockeying and hay made so far.

Beyond this of course, the marketing of CBD now allowed by this decision, will absolutely move the topic of cannabinoids front and center in the overall public sphere. That linked with sovereign experiments on adult use markets of the THC kind (see Holland, Luxembourg and Denmark as well as Portugal and Spain right after that), is far from a null sum game.

Legal Challenges Of Note

Against this changing regulatory schemata, court cases and legal decisions remain very important as they also add flavor to how regulations are interpreted and followed. The most important court case in Europe right now is the one now waiting to be decided in the Court of Human Rights at Strasbourg regarding the human rights implications of accessing the plant.

Beyond that, in Germany, recent case law at a regional social benefits court (LSG) has begun to establish that the cannabis discussion is ultimately between doctors and their patients. While this still does not solve the problem of doctor reluctance to prescribe the drug, barriers are indeed coming down thanks to legal challenges.

Bottom line, the industry has been handed a nice whiff of confidence, but there is a still high and thorny bramble remaining to get through – and it will not happen overnight, or indeed even over the next several years.

Leamington, Ontario and Nanaimo, British Columbia – December 16, 2020 – PRESS RELEASE – Aphria Inc., a global cannabis company, and Tilray, Inc., a cannabis research, cultivation, production and distribution company, today announced that they have entered into a definitive agreement to combine their businesses and create the world’s largest global cannabis company based on pro forma revenue. The deal is pursuant to a plan of arrangement under the Business Corporations Act, and the implied pro forma equity value of the combined company is approximately C$5.0 billion, based on the share price of Aphria and Tilray at the close of market on Dec. 15, 2020. Following the completion of the arrangement, the combined company will have principal offices in the United States (New York and Seattle), Canada (Toronto, Leamington and Vancouver Island), Portugal and Germany, and it will operate under the Tilray corporate name with shares trading on NASDAQ under ticker symbol “TLRY.”

The combined company, supported by low-cost, state-of-the-art cultivation, processing and manufacturing facilities, will have a complete portfolio of branded Cannabis 2.0 products in Canada. Internationally, the combined company will be well-positioned to pursue growth opportunities with Aphria’s medical cannabis and distribution footprint in Germany, and Tilray’s European Union Good Manufacturing Practices (EU-GMP) low-cost cannabis production facility in Portugal, which has export capabilities and tariff-free access to the European Union (EU) to meet increasing global demand for medical cannabis. In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater Brewing Company, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a leading hemp food manufacturer and a pioneer in branded CBD and wellness products. The combined company is expected to have a strong, flexible balance sheet, cash balance and access to capital giving it the ability to accelerate growth and deliver attractive returns for stockholders.

Under the terms of the arrangement, the shareholders of Aphria will receive 0.8381 shares of Tilray for each Aphria common share, while holders of Tilray shares will continue to hold their Tilray shares with no adjustment to their holdings. Upon the completion of the arrangement, Aphria Shareholders will own approximately 62% of the outstanding Tilray Shares on a fully diluted basis, resulting in a reverse acquisition of Tilray, representing a premium of 23% based on the share price at market close on Dec. 15, 2020 to Tilray shareholders. On a pro forma basis for the last twelve months reported by each company, the combined company would have had revenue of C$874 million (US$685 million).

Proven Leadership Team

The combined company will be led by a best-in-class management team and board of directors, with strong track records in consumer-packaged goods and cannabis experience internationally. Upon completion of the arrangement, Aphria’s current Chairman and Chief Executive Officer Irwin D. Simon will lead the combined company as chairman and chief executive officer. The board of directors will consist of nine members, seven of which, including Simon, are current Aphria directors and two of which will be from Tilray, including Brendan Kennedy, and one of which is to be designated. Aphria and Tilray are confident that the leadership team and proposed board of directors of the combined company provides a strong foundation for the combined company to accelerate growth. Additional senior leadership positions at the combined company will be named at a later date.

“This is an exciting day for both companies including our 2,500 employees, for the cannabis industry, and for patients and consumers around the world. We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S. and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital,” said Simon. “Our highly complementary businesses create a combined company with a leading branded product portfolio, including the most comprehensive Cannabis 2.0 product offerings for patients and consumers, along with significant synergies across our operations in Canada, Europe and the United States. Our business combination with Tilray aligns with our strategic focus and emphasis on our highest return priorities as we strive to generate value for all stakeholders.

“I am honored to work with Brendan Kennedy, a pioneer in the cannabis industry, and the Tilray team as they join forces with our talented employees at Aphria,” continued Simon. “I look forward to leading the talented teams of both Aphria and Tilray as we seek to create a leading global cannabis and consumer packaged goods company with a portfolio of medical, wellness and adult-use brands consumers love.”

Kennedy, Tilray’s chief executive officer, commented, “We are thrilled to bring together two cannabis industry leaders. At this nascent stage of development and expansion of the global cannabis market, we believe companies with leading geographic scale, product range and brand expertise are most likely to benefit long-term. By leveraging our combined strengths and capabilities, we expect to be able to meet the needs of consumers more effectively all over the world and advance patient care. With a strong financial profile, low-cost production, leading brands, distribution network and unique partnerships, we believe the combined company will be well-positioned to deliver sustainable, attractive returns for stockholders. I look forward to working with Irwin and the combined company’s management team to make our consumer products more accessible around the world.”

Strategic and Financial Benefits

The combined company will be the largest global cannabis company based on pro forma revenue for the last twelve months reported by each company with scale and breadth across major geographies and a complete portfolio of market leading brands in the major Cannabis 2.0 product categories. Aphria and Tilray each believe the business combination pursuant to the arrangement will provide the following financial and strategic benefits, among others:

• Financial Strength and Flexibility: The combined company will enjoy an attractive financial profile with pro forma revenue of C$874 million (US$685 million) for the last twelve months reported by each company, the highest in the global cannabis industry. In Canada, the combination of Aphria and Tilray will create the leading adult-use cannabis company with gross revenue of C$296 million (US$232 million) in the adult-use market for the twelve months reported by each company. Aphria has generated positive adjusted EBITDA over the last six quarters, which in combination with the synergies to be realized, provides a robust platform for future profitability and cash flow generation for the combined company. This, collectively with the strength of the combined company’s balance sheet and access to capital, is expected to help accelerate global growth and value for the combined company’s stakeholders.
• Creates the Leading Canadian Adult-Use Cannabis Licensed Producer: Together, Aphria and Tilray will be the leading adult-use cannabis Canadian Licensed Producer based on revenue for the last 12 months by combining their respective brands, distribution networks and world-class facilities. In Canada’s C$3.1 billion adult-use, retail market, the combined company will have one of the lowest cost production operations with its state-of-the-art facilities. In addition, the combined company will have a portfolio of carefully curated brands across all consumer segments that are sold through its distribution partners. On a pro forma basis, for the period August to October 2020, the combined company would have held a 17.3% retail market share, the largest share held by any single Licensed Producer in Canada and 700 basis points higher than the next closest competitor.
• Increases Product Breadth and Commitment to Innovation: Leveraging both Aphria and Tilray’s commitment and culture of innovation and brand building, the combined company will serve clients with a complete portfolio of Cannabis 2.0 products and sales and service infrastructure supported by leading distribution partners. Aphria and Tilray’s complementary brands will be available across economy, value, core, premium and premium plus product offerings. In addition, the combined company will have a complete breadth of products in every major cannabis category, including flower, pre-roll, oils, capsules, vapes, edibles and beverages.
• Establishes an Unrivaled European Platform: The combined company will be well-positioned to pursue growth opportunities with its end-to-end EU-GMP supply chain and distribution, which includes Aphria’s German medical cannabis distribution footprint and Tilray’s 2.7-million-square-foot European EU-GMP low-cost cannabis cultivation and production facility in Portugal. In Germany, Aphria’s wholly-owned subsidiary, CC Pharma GmbH, will provide the combined company with distribution capabilities for the Aphria and Tilray medical cannabis brands to more than 13,000 pharmacies. In Portugal, Tilray’s EU-GMP cultivation and production facility will provide the combined company with the capacity to cultivate and produce medical cannabis products in order to meet international demand and has export capabilities, which provides tariff-free access to the EU.
• Enhances Consumer Packaged Goods Presence and Infrastructure in the U.S.: In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. The combined company is expected to leverage SweetWater’s craft beer manufacturing and distribution network to build brand awareness for the combined company’s brands via craft beers, hard seltzers and other beverages as it seeks to take advantage of opportunities for both the adult-use and health and wellbeing beverage trends. The combined company also expects to pursue the opportunity to expand with new or existing CBD or other cannabinoid brands leveraging Manitoba Harvest’s strong hemp and wellness product platform. When U.S. regulations allow, the combined company expects to be well-positioned to compete in the U.S. cannabis market given its existing strong brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis.
• Positions Combined Company to Continue to Grow in the Beverage Segment: The combined company believes it will be well-positioned to pursue an accelerated rate of growth in the Canadian and the U.S. beverage industries by leveraging SweetWater’s innovation, knowledge and expertise to introduce adult-use cannabis brands via craft beers and other beverages. This includes leveraging Aphria and Tilray’s proven distribution networks in Canada to sell SweetWater’s 420 cannabis lifestyle brand in Canada.
• Substantial Synergies: The combination of Aphria and Tilray is expected to deliver approximately C$100 million of annual pre-tax cost synergies within 24 months of the completion of the transaction. The combined company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses. This is expected to include the opportunity for Aphria’s Leamington, Ontario operations to provide additional volume for Tilray’s brands and to replace the need for Tilray to use wholesale cannabis purchases from other licensed producers. Tilray’s London, Ontario facility will also provide Aphria with excess capacity to increase production of additional form factors including their branded edibles and beverages.  The combined company is considering utilizing Tilray’s existing Nanaimo, British Columbia facility for Aphria’s premium Broken Coast brand to increasingly meet consumer demand for its products. The combined company plans to capitalize on opportunities for growth through a broadened product offering and additional form factors, with the aim of increasing adult-use cannabis brand availability across certain Canadian provinces to an expanded customer base with the combined company’s scalable infrastructure. Internationally, the combined company will have the opportunity to reach additional pharmacies and patients via distribution relationships. The combination is expected to unlock significant shareholder value.

Agreement Details

Under the terms of the agreement, the arrangement will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) and will require the approval of at least two-thirds of the votes cast by the Aphria Shareholders at a special meeting. Approval of a majority of the votes cast by Tilray stockholders will be required to, among other things contemplated by the agreement, authorize the issuance of Tilray shares to Aphria shareholders pursuant to the arrangement. Following completion of the arrangement, Aphria will become a wholly-owned subsidiary of Tilray, with Aphria shareholders owning approximately 62% of Tilray.

Completion of the arrangement is subject to regulatory and court approvals and other customary closing conditions. Regulatory approvals expected to be required include Competition Bureau (Canada), U.S. HSR and Germany FDI. The agreement includes certain reciprocal customary provisions, including covenants in respect of the non-solicitation of alternative transactions, a right to match superior proposals and C$65 million (US$50 million) reciprocal termination fee payable under certain circumstances. The arrangement is expected to close in the second quarter of calendar year 2021 following the receipt of such regulatory approvals, as well as court approval of the arrangement.

Each of Aphria’s and Tilray’s respective directors and officers and certain principal Tilray Stockholders have entered into voting support agreements agreeing to vote their Aphria Shares or Tilray Shares, as applicable, in favor of the resolutions put before them pursuant to the agreement.

For further information on the terms and conditions of the arrangement, please refer to the agreement in its entirety, which will be available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Full details of the arrangement will be included in a management information circular of Aphria and in a proxy statement of Tilray to be delivered to Aphria Shareholders and the Tilray Stockholders, respectively, in the coming weeks.

Board of Directors’ Approval

Each of Aphria’s and Tilray’s respective board of directors has unanimously approved the agreement and the arrangement. Jefferies LLC provided a fairness opinion to the Board of Directors of Aphria on Dec. 15, 2020, stating that, as of the date of such opinion and based upon the scope of review and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to the Aphria Shareholders. Cowen provided a fairness opinion dated Dec. 15, 2020 to the board of directors of Tilray stating that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to Tilray.

Advisors

Jefferies LLC is serving as financial advisor and DLA Piper LLP (US), DLA Piper (Canada) LLP and Fasken Martineau Dumoulin LLP are acting as legal counsel to Aphria. Cowen is serving as financial advisor and Cooley LLP and Blake, Cassels and Graydon LLP are acting as legal counsel to Tilray.

Conference Call & Webcast Presentation

Aphria and Tilray executives will host a conference call and webcast with a supplemental presentation to discuss the strategic business combination today, Dec. 16, 2020 at 8:30 a.m. Eastern Time.

To listen to the live call, dial (647) 427-7450 from Canada and the U.S. or (888) 231-8191 from international locations and use the passcode 4334816. A telephone replay will be available approximately two hours after the call concludes through January 13, 2021. To access the recording dial (855) 859-2056 and use the passcode 4334816.

There will also be a simultaneous, live webcast and supplemental presentation available on the Investors section of Aphria’s and Tilray’s website at aphriainc.com and Tilray.com. The webcast will be archived for 30 days.

Leamington, Ontario and Nanaimo, British Columbia – December 16, 2020 – PRESS RELEASE – Aphria Inc., a global cannabis company, and Tilray, Inc., a cannabis research, cultivation, production and distribution company, today announced that they have entered into a definitive agreement to combine their businesses and create the world’s largest global cannabis company based on pro forma revenue. The deal is pursuant to a plan of arrangement under the Business Corporations Act, and the implied pro forma equity value of the combined company is approximately C$5.0 billion, based on the share price of Aphria and Tilray at the close of market on Dec. 15, 2020. Following the completion of the arrangement, the combined company will have principal offices in the United States (New York and Seattle), Canada (Toronto, Leamington and Vancouver Island), Portugal and Germany, and it will operate under the Tilray corporate name with shares trading on NASDAQ under ticker symbol “TLRY.”

The combined company, supported by low-cost, state-of-the-art cultivation, processing and manufacturing facilities, will have a complete portfolio of branded Cannabis 2.0 products in Canada. Internationally, the combined company will be well-positioned to pursue growth opportunities with Aphria’s medical cannabis and distribution footprint in Germany, and Tilray’s European Union Good Manufacturing Practices (EU-GMP) low-cost cannabis production facility in Portugal, which has export capabilities and tariff-free access to the European Union (EU) to meet increasing global demand for medical cannabis. In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater Brewing Company, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a leading hemp food manufacturer and a pioneer in branded CBD and wellness products. The combined company is expected to have a strong, flexible balance sheet, cash balance and access to capital giving it the ability to accelerate growth and deliver attractive returns for stockholders.

Under the terms of the arrangement, the shareholders of Aphria will receive 0.8381 shares of Tilray for each Aphria common share, while holders of Tilray shares will continue to hold their Tilray shares with no adjustment to their holdings. Upon the completion of the arrangement, Aphria Shareholders will own approximately 62% of the outstanding Tilray Shares on a fully diluted basis, resulting in a reverse acquisition of Tilray, representing a premium of 23% based on the share price at market close on Dec. 15, 2020 to Tilray shareholders. On a pro forma basis for the last twelve months reported by each company, the combined company would have had revenue of C$874 million (US$685 million).

Proven Leadership Team

The combined company will be led by a best-in-class management team and board of directors, with strong track records in consumer-packaged goods and cannabis experience internationally. Upon completion of the arrangement, Aphria’s current Chairman and Chief Executive Officer Irwin D. Simon will lead the combined company as chairman and chief executive officer. The board of directors will consist of nine members, seven of which, including Simon, are current Aphria directors and two of which will be from Tilray, including Brendan Kennedy, and one of which is to be designated. Aphria and Tilray are confident that the leadership team and proposed board of directors of the combined company provides a strong foundation for the combined company to accelerate growth. Additional senior leadership positions at the combined company will be named at a later date.

“This is an exciting day for both companies including our 2,500 employees, for the cannabis industry, and for patients and consumers around the world. We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S. and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital,” said Simon. “Our highly complementary businesses create a combined company with a leading branded product portfolio, including the most comprehensive Cannabis 2.0 product offerings for patients and consumers, along with significant synergies across our operations in Canada, Europe and the United States. Our business combination with Tilray aligns with our strategic focus and emphasis on our highest return priorities as we strive to generate value for all stakeholders.

“I am honored to work with Brendan Kennedy, a pioneer in the cannabis industry, and the Tilray team as they join forces with our talented employees at Aphria,” continued Simon. “I look forward to leading the talented teams of both Aphria and Tilray as we seek to create a leading global cannabis and consumer packaged goods company with a portfolio of medical, wellness and adult-use brands consumers love.”

Kennedy, Tilray’s chief executive officer, commented, “We are thrilled to bring together two cannabis industry leaders. At this nascent stage of development and expansion of the global cannabis market, we believe companies with leading geographic scale, product range and brand expertise are most likely to benefit long-term. By leveraging our combined strengths and capabilities, we expect to be able to meet the needs of consumers more effectively all over the world and advance patient care. With a strong financial profile, low-cost production, leading brands, distribution network and unique partnerships, we believe the combined company will be well-positioned to deliver sustainable, attractive returns for stockholders. I look forward to working with Irwin and the combined company’s management team to make our consumer products more accessible around the world.”

Strategic and Financial Benefits

The combined company will be the largest global cannabis company based on pro forma revenue for the last twelve months reported by each company with scale and breadth across major geographies and a complete portfolio of market leading brands in the major Cannabis 2.0 product categories. Aphria and Tilray each believe the business combination pursuant to the arrangement will provide the following financial and strategic benefits, among others:

• Financial Strength and Flexibility: The combined company will enjoy an attractive financial profile with pro forma revenue of C$874 million (US$685 million) for the last twelve months reported by each company, the highest in the global cannabis industry. In Canada, the combination of Aphria and Tilray will create the leading adult-use cannabis company with gross revenue of C$296 million (US$232 million) in the adult-use market for the twelve months reported by each company. Aphria has generated positive adjusted EBITDA over the last six quarters, which in combination with the synergies to be realized, provides a robust platform for future profitability and cash flow generation for the combined company. This, collectively with the strength of the combined company’s balance sheet and access to capital, is expected to help accelerate global growth and value for the combined company’s stakeholders.
• Creates the Leading Canadian Adult-Use Cannabis Licensed Producer: Together, Aphria and Tilray will be the leading adult-use cannabis Canadian Licensed Producer based on revenue for the last 12 months by combining their respective brands, distribution networks and world-class facilities. In Canada’s C$3.1 billion adult-use, retail market, the combined company will have one of the lowest cost production operations with its state-of-the-art facilities. In addition, the combined company will have a portfolio of carefully curated brands across all consumer segments that are sold through its distribution partners. On a pro forma basis, for the period August to October 2020, the combined company would have held a 17.3% retail market share, the largest share held by any single Licensed Producer in Canada and 700 basis points higher than the next closest competitor.
• Increases Product Breadth and Commitment to Innovation: Leveraging both Aphria and Tilray’s commitment and culture of innovation and brand building, the combined company will serve clients with a complete portfolio of Cannabis 2.0 products and sales and service infrastructure supported by leading distribution partners. Aphria and Tilray’s complementary brands will be available across economy, value, core, premium and premium plus product offerings. In addition, the combined company will have a complete breadth of products in every major cannabis category, including flower, pre-roll, oils, capsules, vapes, edibles and beverages.
• Establishes an Unrivaled European Platform: The combined company will be well-positioned to pursue growth opportunities with its end-to-end EU-GMP supply chain and distribution, which includes Aphria’s German medical cannabis distribution footprint and Tilray’s 2.7-million-square-foot European EU-GMP low-cost cannabis cultivation and production facility in Portugal. In Germany, Aphria’s wholly-owned subsidiary, CC Pharma GmbH, will provide the combined company with distribution capabilities for the Aphria and Tilray medical cannabis brands to more than 13,000 pharmacies. In Portugal, Tilray’s EU-GMP cultivation and production facility will provide the combined company with the capacity to cultivate and produce medical cannabis products in order to meet international demand and has export capabilities, which provides tariff-free access to the EU.
• Enhances Consumer Packaged Goods Presence and Infrastructure in the U.S.: In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. The combined company is expected to leverage SweetWater’s craft beer manufacturing and distribution network to build brand awareness for the combined company’s brands via craft beers, hard seltzers and other beverages as it seeks to take advantage of opportunities for both the adult-use and health and wellbeing beverage trends. The combined company also expects to pursue the opportunity to expand with new or existing CBD or other cannabinoid brands leveraging Manitoba Harvest’s strong hemp and wellness product platform. When U.S. regulations allow, the combined company expects to be well-positioned to compete in the U.S. cannabis market given its existing strong brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis.
• Positions Combined Company to Continue to Grow in the Beverage Segment: The combined company believes it will be well-positioned to pursue an accelerated rate of growth in the Canadian and the U.S. beverage industries by leveraging SweetWater’s innovation, knowledge and expertise to introduce adult-use cannabis brands via craft beers and other beverages. This includes leveraging Aphria and Tilray’s proven distribution networks in Canada to sell SweetWater’s 420 cannabis lifestyle brand in Canada.
• Substantial Synergies: The combination of Aphria and Tilray is expected to deliver approximately C$100 million of annual pre-tax cost synergies within 24 months of the completion of the transaction. The combined company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses. This is expected to include the opportunity for Aphria’s Leamington, Ontario operations to provide additional volume for Tilray’s brands and to replace the need for Tilray to use wholesale cannabis purchases from other licensed producers. Tilray’s London, Ontario facility will also provide Aphria with excess capacity to increase production of additional form factors including their branded edibles and beverages.  The combined company is considering utilizing Tilray’s existing Nanaimo, British Columbia facility for Aphria’s premium Broken Coast brand to increasingly meet consumer demand for its products. The combined company plans to capitalize on opportunities for growth through a broadened product offering and additional form factors, with the aim of increasing adult-use cannabis brand availability across certain Canadian provinces to an expanded customer base with the combined company’s scalable infrastructure. Internationally, the combined company will have the opportunity to reach additional pharmacies and patients via distribution relationships. The combination is expected to unlock significant shareholder value.

Agreement Details

Under the terms of the agreement, the arrangement will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) and will require the approval of at least two-thirds of the votes cast by the Aphria Shareholders at a special meeting. Approval of a majority of the votes cast by Tilray stockholders will be required to, among other things contemplated by the agreement, authorize the issuance of Tilray shares to Aphria shareholders pursuant to the arrangement. Following completion of the arrangement, Aphria will become a wholly-owned subsidiary of Tilray, with Aphria shareholders owning approximately 62% of Tilray.

Completion of the arrangement is subject to regulatory and court approvals and other customary closing conditions. Regulatory approvals expected to be required include Competition Bureau (Canada), U.S. HSR and Germany FDI. The agreement includes certain reciprocal customary provisions, including covenants in respect of the non-solicitation of alternative transactions, a right to match superior proposals and C$65 million (US$50 million) reciprocal termination fee payable under certain circumstances. The arrangement is expected to close in the second quarter of calendar year 2021 following the receipt of such regulatory approvals, as well as court approval of the arrangement.

Each of Aphria’s and Tilray’s respective directors and officers and certain principal Tilray Stockholders have entered into voting support agreements agreeing to vote their Aphria Shares or Tilray Shares, as applicable, in favor of the resolutions put before them pursuant to the agreement.

For further information on the terms and conditions of the arrangement, please refer to the agreement in its entirety, which will be available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Full details of the arrangement will be included in a management information circular of Aphria and in a proxy statement of Tilray to be delivered to Aphria Shareholders and the Tilray Stockholders, respectively, in the coming weeks.

Board of Directors’ Approval

Each of Aphria’s and Tilray’s respective board of directors has unanimously approved the agreement and the arrangement. Jefferies LLC provided a fairness opinion to the Board of Directors of Aphria on Dec. 15, 2020, stating that, as of the date of such opinion and based upon the scope of review and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to the Aphria Shareholders. Cowen provided a fairness opinion dated Dec. 15, 2020 to the board of directors of Tilray stating that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to Tilray.

Advisors

Jefferies LLC is serving as financial advisor and DLA Piper LLP (US), DLA Piper (Canada) LLP and Fasken Martineau Dumoulin LLP are acting as legal counsel to Aphria. Cowen is serving as financial advisor and Cooley LLP and Blake, Cassels and Graydon LLP are acting as legal counsel to Tilray.

Conference Call & Webcast Presentation

Aphria and Tilray executives will host a conference call and webcast with a supplemental presentation to discuss the strategic business combination today, Dec. 16, 2020 at 8:30 a.m. Eastern Time.

To listen to the live call, dial (647) 427-7450 from Canada and the U.S. or (888) 231-8191 from international locations and use the passcode 4334816. A telephone replay will be available approximately two hours after the call concludes through January 13, 2021. To access the recording dial (855) 859-2056 and use the passcode 4334816.

There will also be a simultaneous, live webcast and supplemental presentation available on the Investors section of Aphria’s and Tilray’s website at aphriainc.com and Tilray.com. The webcast will be archived for 30 days.

Leamington, Ontario and Nanaimo, British Columbia – December 16, 2020 – PRESS RELEASE – Aphria Inc., a global cannabis company, and Tilray, Inc., a cannabis research, cultivation, production and distribution company, today announced that they have entered into a definitive agreement to combine their businesses and create the world’s largest global cannabis company based on pro forma revenue. The deal is pursuant to a plan of arrangement under the Business Corporations Act, and the implied pro forma equity value of the combined company is approximately C$5.0 billion, based on the share price of Aphria and Tilray at the close of market on Dec. 15, 2020. Following the completion of the arrangement, the combined company will have principal offices in the United States (New York and Seattle), Canada (Toronto, Leamington and Vancouver Island), Portugal and Germany, and it will operate under the Tilray corporate name with shares trading on NASDAQ under ticker symbol “TLRY.”

The combined company, supported by low-cost, state-of-the-art cultivation, processing and manufacturing facilities, will have a complete portfolio of branded Cannabis 2.0 products in Canada. Internationally, the combined company will be well-positioned to pursue growth opportunities with Aphria’s medical cannabis and distribution footprint in Germany, and Tilray’s European Union Good Manufacturing Practices (EU-GMP) low-cost cannabis production facility in Portugal, which has export capabilities and tariff-free access to the European Union (EU) to meet increasing global demand for medical cannabis. In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater Brewing Company, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a leading hemp food manufacturer and a pioneer in branded CBD and wellness products. The combined company is expected to have a strong, flexible balance sheet, cash balance and access to capital giving it the ability to accelerate growth and deliver attractive returns for stockholders.

Under the terms of the arrangement, the shareholders of Aphria will receive 0.8381 shares of Tilray for each Aphria common share, while holders of Tilray shares will continue to hold their Tilray shares with no adjustment to their holdings. Upon the completion of the arrangement, Aphria Shareholders will own approximately 62% of the outstanding Tilray Shares on a fully diluted basis, resulting in a reverse acquisition of Tilray, representing a premium of 23% based on the share price at market close on Dec. 15, 2020 to Tilray shareholders. On a pro forma basis for the last twelve months reported by each company, the combined company would have had revenue of C$874 million (US$685 million).

Proven Leadership Team

The combined company will be led by a best-in-class management team and board of directors, with strong track records in consumer-packaged goods and cannabis experience internationally. Upon completion of the arrangement, Aphria’s current Chairman and Chief Executive Officer Irwin D. Simon will lead the combined company as chairman and chief executive officer. The board of directors will consist of nine members, seven of which, including Simon, are current Aphria directors and two of which will be from Tilray, including Brendan Kennedy, and one of which is to be designated. Aphria and Tilray are confident that the leadership team and proposed board of directors of the combined company provides a strong foundation for the combined company to accelerate growth. Additional senior leadership positions at the combined company will be named at a later date.

“This is an exciting day for both companies including our 2,500 employees, for the cannabis industry, and for patients and consumers around the world. We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S. and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital,” said Simon. “Our highly complementary businesses create a combined company with a leading branded product portfolio, including the most comprehensive Cannabis 2.0 product offerings for patients and consumers, along with significant synergies across our operations in Canada, Europe and the United States. Our business combination with Tilray aligns with our strategic focus and emphasis on our highest return priorities as we strive to generate value for all stakeholders.

“I am honored to work with Brendan Kennedy, a pioneer in the cannabis industry, and the Tilray team as they join forces with our talented employees at Aphria,” continued Simon. “I look forward to leading the talented teams of both Aphria and Tilray as we seek to create a leading global cannabis and consumer packaged goods company with a portfolio of medical, wellness and adult-use brands consumers love.”

Kennedy, Tilray’s chief executive officer, commented, “We are thrilled to bring together two cannabis industry leaders. At this nascent stage of development and expansion of the global cannabis market, we believe companies with leading geographic scale, product range and brand expertise are most likely to benefit long-term. By leveraging our combined strengths and capabilities, we expect to be able to meet the needs of consumers more effectively all over the world and advance patient care. With a strong financial profile, low-cost production, leading brands, distribution network and unique partnerships, we believe the combined company will be well-positioned to deliver sustainable, attractive returns for stockholders. I look forward to working with Irwin and the combined company’s management team to make our consumer products more accessible around the world.”

Strategic and Financial Benefits

The combined company will be the largest global cannabis company based on pro forma revenue for the last twelve months reported by each company with scale and breadth across major geographies and a complete portfolio of market leading brands in the major Cannabis 2.0 product categories. Aphria and Tilray each believe the business combination pursuant to the arrangement will provide the following financial and strategic benefits, among others:

• Financial Strength and Flexibility: The combined company will enjoy an attractive financial profile with pro forma revenue of C$874 million (US$685 million) for the last twelve months reported by each company, the highest in the global cannabis industry. In Canada, the combination of Aphria and Tilray will create the leading adult-use cannabis company with gross revenue of C$296 million (US$232 million) in the adult-use market for the twelve months reported by each company. Aphria has generated positive adjusted EBITDA over the last six quarters, which in combination with the synergies to be realized, provides a robust platform for future profitability and cash flow generation for the combined company. This, collectively with the strength of the combined company’s balance sheet and access to capital, is expected to help accelerate global growth and value for the combined company’s stakeholders.
• Creates the Leading Canadian Adult-Use Cannabis Licensed Producer: Together, Aphria and Tilray will be the leading adult-use cannabis Canadian Licensed Producer based on revenue for the last 12 months by combining their respective brands, distribution networks and world-class facilities. In Canada’s C$3.1 billion adult-use, retail market, the combined company will have one of the lowest cost production operations with its state-of-the-art facilities. In addition, the combined company will have a portfolio of carefully curated brands across all consumer segments that are sold through its distribution partners. On a pro forma basis, for the period August to October 2020, the combined company would have held a 17.3% retail market share, the largest share held by any single Licensed Producer in Canada and 700 basis points higher than the next closest competitor.
• Increases Product Breadth and Commitment to Innovation: Leveraging both Aphria and Tilray’s commitment and culture of innovation and brand building, the combined company will serve clients with a complete portfolio of Cannabis 2.0 products and sales and service infrastructure supported by leading distribution partners. Aphria and Tilray’s complementary brands will be available across economy, value, core, premium and premium plus product offerings. In addition, the combined company will have a complete breadth of products in every major cannabis category, including flower, pre-roll, oils, capsules, vapes, edibles and beverages.
• Establishes an Unrivaled European Platform: The combined company will be well-positioned to pursue growth opportunities with its end-to-end EU-GMP supply chain and distribution, which includes Aphria’s German medical cannabis distribution footprint and Tilray’s 2.7-million-square-foot European EU-GMP low-cost cannabis cultivation and production facility in Portugal. In Germany, Aphria’s wholly-owned subsidiary, CC Pharma GmbH, will provide the combined company with distribution capabilities for the Aphria and Tilray medical cannabis brands to more than 13,000 pharmacies. In Portugal, Tilray’s EU-GMP cultivation and production facility will provide the combined company with the capacity to cultivate and produce medical cannabis products in order to meet international demand and has export capabilities, which provides tariff-free access to the EU.
• Enhances Consumer Packaged Goods Presence and Infrastructure in the U.S.: In the United States, the combined company will have a strong consumer packaged goods presence and infrastructure with two strategic pillars, including SweetWater, a cannabis lifestyle branded craft brewer, and Manitoba Harvest, a pioneer in branded hemp, CBD and wellness products with access to 17,000 stores in North America. The combined company is expected to leverage SweetWater’s craft beer manufacturing and distribution network to build brand awareness for the combined company’s brands via craft beers, hard seltzers and other beverages as it seeks to take advantage of opportunities for both the adult-use and health and wellbeing beverage trends. The combined company also expects to pursue the opportunity to expand with new or existing CBD or other cannabinoid brands leveraging Manitoba Harvest’s strong hemp and wellness product platform. When U.S. regulations allow, the combined company expects to be well-positioned to compete in the U.S. cannabis market given its existing strong brands and distribution system in addition to its track record of growth in consumer-packaged goods and cannabis.
• Positions Combined Company to Continue to Grow in the Beverage Segment: The combined company believes it will be well-positioned to pursue an accelerated rate of growth in the Canadian and the U.S. beverage industries by leveraging SweetWater’s innovation, knowledge and expertise to introduce adult-use cannabis brands via craft beers and other beverages. This includes leveraging Aphria and Tilray’s proven distribution networks in Canada to sell SweetWater’s 420 cannabis lifestyle brand in Canada.
• Substantial Synergies: The combination of Aphria and Tilray is expected to deliver approximately C$100 million of annual pre-tax cost synergies within 24 months of the completion of the transaction. The combined company expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales and marketing and corporate expenses. This is expected to include the opportunity for Aphria’s Leamington, Ontario operations to provide additional volume for Tilray’s brands and to replace the need for Tilray to use wholesale cannabis purchases from other licensed producers. Tilray’s London, Ontario facility will also provide Aphria with excess capacity to increase production of additional form factors including their branded edibles and beverages.  The combined company is considering utilizing Tilray’s existing Nanaimo, British Columbia facility for Aphria’s premium Broken Coast brand to increasingly meet consumer demand for its products. The combined company plans to capitalize on opportunities for growth through a broadened product offering and additional form factors, with the aim of increasing adult-use cannabis brand availability across certain Canadian provinces to an expanded customer base with the combined company’s scalable infrastructure. Internationally, the combined company will have the opportunity to reach additional pharmacies and patients via distribution relationships. The combination is expected to unlock significant shareholder value.

Agreement Details

Under the terms of the agreement, the arrangement will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) and will require the approval of at least two-thirds of the votes cast by the Aphria Shareholders at a special meeting. Approval of a majority of the votes cast by Tilray stockholders will be required to, among other things contemplated by the agreement, authorize the issuance of Tilray shares to Aphria shareholders pursuant to the arrangement. Following completion of the arrangement, Aphria will become a wholly-owned subsidiary of Tilray, with Aphria shareholders owning approximately 62% of Tilray.

Completion of the arrangement is subject to regulatory and court approvals and other customary closing conditions. Regulatory approvals expected to be required include Competition Bureau (Canada), U.S. HSR and Germany FDI. The agreement includes certain reciprocal customary provisions, including covenants in respect of the non-solicitation of alternative transactions, a right to match superior proposals and C$65 million (US$50 million) reciprocal termination fee payable under certain circumstances. The arrangement is expected to close in the second quarter of calendar year 2021 following the receipt of such regulatory approvals, as well as court approval of the arrangement.

Each of Aphria’s and Tilray’s respective directors and officers and certain principal Tilray Stockholders have entered into voting support agreements agreeing to vote their Aphria Shares or Tilray Shares, as applicable, in favor of the resolutions put before them pursuant to the agreement.

For further information on the terms and conditions of the arrangement, please refer to the agreement in its entirety, which will be available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Full details of the arrangement will be included in a management information circular of Aphria and in a proxy statement of Tilray to be delivered to Aphria Shareholders and the Tilray Stockholders, respectively, in the coming weeks.

Board of Directors’ Approval

Each of Aphria’s and Tilray’s respective board of directors has unanimously approved the agreement and the arrangement. Jefferies LLC provided a fairness opinion to the Board of Directors of Aphria on Dec. 15, 2020, stating that, as of the date of such opinion and based upon the scope of review and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to the Aphria Shareholders. Cowen provided a fairness opinion dated Dec. 15, 2020 to the board of directors of Tilray stating that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Exchange Ratio is fair, from a financial point of view, to Tilray.

Advisors

Jefferies LLC is serving as financial advisor and DLA Piper LLP (US), DLA Piper (Canada) LLP and Fasken Martineau Dumoulin LLP are acting as legal counsel to Aphria. Cowen is serving as financial advisor and Cooley LLP and Blake, Cassels and Graydon LLP are acting as legal counsel to Tilray.

Conference Call & Webcast Presentation

Aphria and Tilray executives will host a conference call and webcast with a supplemental presentation to discuss the strategic business combination today, Dec. 16, 2020 at 8:30 a.m. Eastern Time.

To listen to the live call, dial (647) 427-7450 from Canada and the U.S. or (888) 231-8191 from international locations and use the passcode 4334816. A telephone replay will be available approximately two hours after the call concludes through January 13, 2021. To access the recording dial (855) 859-2056 and use the passcode 4334816.

There will also be a simultaneous, live webcast and supplemental presentation available on the Investors section of Aphria’s and Tilray’s website at aphriainc.com and Tilray.com. The webcast will be archived for 30 days.