Shares in Tilray Inc (NASDAQ:TLRY) climbed in Tuesday’s premarket session after it announced that it has inked a deal with Authentic Brands Group to develop and market consumer cannabis brands around the world.
The deal was announced the same day that the cannabis company’s lock-up period expired, allowing executives and other early investors to sell their stock.
With a global retail footprint of more than 100,000 points of sale and more than 4,500 branded stores and shop-in-shops, Authentic’s portfolio generates roughly $9 billion in retail sales annually.
Under the deal, Tilray is hoping to get its cannabis products into more brick-and-mortar and online outlets rather than the cannabis dispensaries’ direct-to-patient sales that are Tilray’s mainstay right now. It is attractive for Tilray that Authentic currently reaches nearly 250 million social media followers across key digital platforms.
Shares in Tilray dropped 14% to $86.59.
“We are thrilled to partner with Authentic, a global leader known for expertly managing and marketing an owned portfolio of iconic brands,” said Tilray CEO Brendan Kennedy. “As we work to expand Tilray’s global presence, this agreement leverages our complementary strengths and will be accretive to our shareholders as we reach new consumers across the entertainment, fashion, beauty, home and health and wellness sectors.”
The deal with Authentic is a revenue-sharing agreement, with Tilray supplying various cannabis-based products to be sold through Authentic’s distribution channels. In exchange, Tilray will initially pay Authentic US$100 million and up to US$250 million in cash and stock, subject to the achievement of certain commercial milestones and on changes to regulations in the US and elsewhere. Tilray will receive 49% of the net revenue from cannabis products with a guaranteed minimum of up to $10 million each year for 10 years.
Initially the companies will focus on cannabidol, or CBD, products, which do not have a psychoactive effect on most people in the same way tetrahydrocannabinol, or THC, does.
The new partnership will be forged via Anheuser’s Canadian subsidiary Labatt Breweries while Tilray will be involved through its subsidiary High Park Co.
The two companies will each invest up to $50 million to conduct research on nonalcoholic beverages containing THC and CBD.
The idea is that the investigative work will prepare the companies for the commercial launch of cannabis drinks.
Tilray focuses on medical cannabis research, cultivation, processing and distribution. The Canadian pharmaceutical and cannabis company is headquartered in Nanaimo, British Columbia.
–This story was updated to give the latest stock price–
Contact Uttara Choudhury at [email protected]