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The Cannabis Sector: Mergers, Acquisitions, and Price Upgrades

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Nov. 20 2020, Updated 4:57 p.m. ET

Mergers and acquisitions

The cannabis sector remains hot for mergers and acquisitions as companies rush to capture a piece of the recreational cannabis market. Last week, Canopy Growth (WEED) announced that it had acquired Annabis Medical, an importer and distributor of medical cannabis in the Czech Republic.

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Cannabis Wheaton

Last week, Cannabis Wheaton announced its acquisition of a licensed producer in Nova Scotia, Robinson’s Cannabis, which is constructing a 27,700-square-foot facility ahead of the legalization of recreational cannabis in Canada. Also, MedReleaf (MEDFF) announced that it had completed the acquisition of a 1 million-square-foot facility in Exeter, Ontario.

In our series, Cannabis Players and Their Business Combinations, we discussed how Canopy Growth (WEED), Aurora Cannabis (ACB)(ACBFF), Aphria (APHQF), and others have acquired or partnered with other companies to establish their foothold in the market (HMLSF). The above chart shows the capacity that’s expected to come online for these companies.

Canadian licensed producers are using the opportunity to leverage their cultivation capacity in the emerging medical cannabis market. Canopy Growth’s partnership in the Czech Republic could allow it to penetrate the European market.

Supply agreement

Last week, some of the above companies completed a supply agreement with the SAQ (Société des alcools du Québec) for recreational cannabis, with Hydropothecary (HYYDF) emerging as the preferred non-medical cannabis supplier to the province upon cannabis legalization in Canada.

GMP Securities has raised Hydropothecary’s price target price by ~12% to 9.50 Canadian dollars and has maintained its “buy” rating. For more on analysts’ ratings and price target changes for cannabis players, read Cannabis Stocks: Analysts’ April Ratings and Price Targets.

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