As demand for legal marijuana grows, so do the goals of marijuana companies, especially marijuana growers. Some companies have started to grow through acquisitions. Recently, the largest marijuana acquisition in history took place, with Aurora Cannabis (ACBFF) acquiring CanniMed Therapeutics (CMMDF) in a deal worth nearly $1 billion. This should increase Aurora’s annual production capacity well above 100,000 kilograms. With some of the smaller marijuana growers being acquired as Canada prepares for recreational legalization this summer, this could indicate some consolidation in the marijuana industry. If this serves to be true, here are two marijuana stocks that could be involved in a potential buy-out.
OrganiGram Holdings (ORGMF)
Recently, OrganiGram completed a bought-deal offering to fund the expansion of its grow facility in Moncton, New Brunswick. This expansion is estimated to more than double the current square footage and more than triple its annual production to 65,000 kilograms. OrganiGram’s 65,000-kilogram annual production is enough to attract larger growers without being too expensive.
But, what may really lure in a buyer are the margin advantages. The company has chosen to minimize its expenses by maintaining all growing in just one location. OrganiGram is also expanding its product portfolio to include extracts and oils, which generate significantly higher margins than traditional dried marijuana. For these reasons, OrganiGram could be scooped up to advance a potential acquirer.
2. Emerald Health Therapeutics (EMHTF)
This is another marijuana stock that growers seeking expansion may have their eyes on, as the company has been expanding on its own. The 50-50 partnership with Village Farms International (VFFIF) really stands out. This deal amounts an already contructed 25-acre, 1.1 million-square-foot grow facility known as Pure Sunfarms. Pure Sunfarms also boasts the option of adding another 3.7 million square feet of greenhouse space to further increase its annual production.
The company is also constructing a 32-acre site from scratch. When completed, it could assert up to 1 million square feet of growing capacity. Like OrganiGram, Emerald Health is also beginning to place more importance on higher-margin oils and extracts to increase the company’s revenue. This marijuana stock’s ambitious growth plans, emphasized by up to 5.8 million square feet of capacity, could really entice a buyer looking to expand.