Two big players in the Canadian cannabis industry, Aurora and MedReleaf, have announced a merger that would effectively make them the largest cannabis producer in the country. If approved, this would be the biggest transaction in Canadian cannabis so far, valued at C$3.2 billion.
The Aurora/MedReleaf merger would place the company at an estimated C$7 billion market value, launching them over current Canadian cannabis cash king Canopy Growth. But, as Aurora's CCO says, they won't stop there - they're aiming “to become the world’s largest cannabis company.”
With an estimated 570,000 kg output, Aurora has the potential to meet the entirety of Canadian cannabis demand, although that has financial analyst Jason Zanderberg feeling a little nervous about smaller producers in the country.
"As major producers become bigger it puts pressure on the others," Zanderberg told Leafly. "It’s difficult for smaller producers to compete with that much firepower."
Not everyone believes this though. Allan Rewak, the acting executive director of Cannabis Canada thinks there will be lots of business to go around.
"I think there is plenty of room in the market for players of all sizes."
Either way, Zanderberg says we should expect more consolidation in the cannabis market, and that ultimately this will be good for consumers, and shouldn't lead to price hikes.
"In general, when you get some sophisticated players in a sector, it is good for consumers because you have coordinated production and sales schedules."
Reark agrees, saying this is proof of the growing acceptance of the industry.
"It shows the continued normalization of [the] sector, and incredible interest in it by financial markets, consumers and others."