Canadian cannabis company Tilray announced its definitive merger agreement with with its largest shareholder Privateer Holdings.
The merger will extend the lock-up period and will issue up to 75 million Tilray shares to equity holders of Privateer. The share issuance, which covers 77% of Tilray's total outstanding shares, will be done over an extended two-year period.
Under the deal, which cancels the 5 million shares currently held by Privateer, there will be a downstream merger between Privateer and a wholly-owned subsidiary of Tilray. The subsidiary will remain after the merger while newly issued shares of Tilray common stock will be given to Privateer equity holders.
Mark Castaneda, chief financial officer (CFO) of Tilray, explained “We appreciate the long-term confidence that Privateer has in the Tilray business and we look forward to having their investors as part of our stockholder base. We believe this transaction will give Tilray greater control and operating flexibility, while allowing us to effectively manage our public float.”
Meanwhile, Michael Blue, managing partner of Privateer, expressed “We are pleased to sign this agreement with Tilray, which we believe will maximize overall returns for our visionary investors in a tax-efficient manner while giving Tilray the operating flexibility it needs to continue to be a leader in the rapidly emerging global cannabis industry.”
Prior to Tilray's initial public offering in July 2018, Privateer served as its initial incubator and financier. In early 2019, the private-equity firm distributed ownership in its three non-Tilray subsidiaries directly to its stockholders and left Tilray assets in its portfolio.
The lockout period dictates that Privateer shareholders would only be able to sell the newly issued stock they received under certain conditions over a two-year period.
Tilray is the leading company in cannabis research, cultivation, production, and distribution globally. Brendan Kennedy, chief executive officer (CEO) of Tilray also serves as the CEO of Privateer.
Tilray shares recorded a 2.6% increase to $32.88 in premarket trading on Monday, September 9.
