Cannabis stocks are on fire after a $220 million M&A deal

The market continues to grow.
The market continues to grow.
Image: REUTERS/Blair Gable
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Canadian weed producer Aurora Cannabis has gained a new foothold in South America by acquiring ICC Labs, another Canada-based company, which has a competitive advantage in the region. The deal, worth C$290 million ($220 million), has sent weed stocks soaring.

The takeover is the latest in a series of acquisitions by Aurora, which has gobbled up at least 10 companies in the last two years in the rapidly consolidating industry. Aurora shares rose as much as 4.1%, and ICC added 5.6%.

Vancouver-based ICC currently holds licenses to produce medical marijuana in Colombia, and an agreement to export cannabidiol, or CBD, products to Mexico. The company also has a more than 70% market share in Uruguay, which became the first country to fully legalize recreational cannabis in 2017. According to a press release, ICC also plans to increase its production capacity to 450,000 kilograms of cannabis per year, and two new facilities are under construction in Colombia and Uruguay.

“We see ICC as the jewel of the South American market,” Cam Battley, chief corporate officer of Aurora, told Bloomberg. “This is going to be our anchor in South America and we have very big plans for that continent,” he said.

Other Canadian cannabis companies saw gains after the Aurora and ICC deal was announced. MarketWatch reports that Valen GroWorks rallied 19%, Tilray Inc. increased 15%, Cronos Group rose 1.5%, and Canopy Growth was up 2%. Cannabis stocks rose in the US too—Nevada-based Cannabis Sativa increased 11%, while Colorado-based GrowGeneration Corp rose 5%.

According to Bloomberg, the Cannabis stock index has gained 35% since mid-August, when Canopy Growth announced a $4 billion investment into Corona beer maker, Constellation Brands.