Tweed Marijuana Inc. (TWD: TSX) (TWMJF: OTC) and Bedrocan Cannabis Corp. (BED: TSX) (BNRDF: OTC) entered into an agreement where Tweed will acquire Bedrocan Canada which will then become a subsidiary of the company.

The companies are focused on increasing market penetration and market share through its distinct and differentiated product lines. The companies have over 5,000 customers (combined) who will benefit from having access to products from both producers. The companies will have the largest production and sales capacity. Tweed and Bedrocan Canada will also be able allocate additional resources to product research and innovation while continuing to focus on customer service.

Terms of Agreement

Tweed will appoint two people selected by Bedrocan Canada to Tweed’s Board of Directors. Bedrocan Canada shareholders will receive 0.4650 common shares of Tweed for each common share of Bedrocan Canada held. Tweed expects to issue approximately 33.9 million common shares having an aggregate value of approximately $61 million based off of Tweed’s closing price yesterday ($1.80).

The acquisition is expected to close by the end of August 2015. The closing of the acquisition remains subject to Bedrocan Canada shareholder approval, court approval, approval by the TSX Venture Exchange, and an amendment to the terms of Bedrocan Canada’s license agreement with Bedrocan Beheer BV (its Dutch licensor).

What will change?

  • Name: Tweed will change its name at its annual shareholder meeting. This will be done to better reflect the new business and the evolution of the company as a multi-brand holding company. Tweed said this acquisition is just the beginning and the company plans to continue to expand its technology, brand and geographic diversity.
  • Capacity: The consolidated licensed sales capacity of Tweed and Bedrocan Canada is approximately 13,220 pounds per year. The number of clients and overall capacity may continue to increase if Health Canada approves Tweed’s three existing facilities (two indoor facilities and a greenhouse platform).

Sum of the parts is greater than the individual businesses

Tweed and Bedrocan Canada operate in the same industry but attract distinct market segments that appeal to different consumer needs. Tweed will be a holding company that is able to respond to consumer needs, increase its market share and diversify its client base.

The Bedrocan Canada brand will continue to operate separately but in alignment with Tweed’s operating divisions. Bedrocan will be supported by Tweed’s divisions as it continues to establish its leadership within the clinical and research communities.

Tweed was the first publicly traded federally regulated cannabis company in North America. With its Dutch licensor, Bedrocan Canada is the most experienced medical marijuana producer in the world. Uniting Tweed, Tweed Farms, and Bedrocan Canada creates an organization that is positioned to capitalize on the rapidly growing North American cannabis industry.

Industry Consolidation

2014 was a record year for many cannabis companies; for others it was just the start. While we do not expect any year to be like 2014, we will certainly see a lot of growth. Many cannabis companies are breaking out of their developmental stage and starting to enter normal business cycles. These growth opportunities will lead to industry consolidation which will create stronger companies.

During 2014, company stock prices were not the only thing to grow significantly. The number of publicly traded cannabis companies grew at an insane rate. There are over 250 publicly traded cannabis companies; we believe that 50 are viable and that is being generous. We expect to see many of these companies consolidate and form larger companies with more diverse and efficient operations. This will be a necessary component to the success of this industry.

https://technical420.com/

Authored by Michael Berger

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