Wednesday, 25 Nov 2020

Aphria to buy U.S. craft brewer SweetWater in post-election play

Aphria said on Wednesday it plans to buy craft brewer SweetWater Brewing for $300 million as it looks to expand into the United States while becoming the first major pot producer to enter the alcoholic beverages market.

The deal gives Aphria a U.S. distribution point at a time when cannabis is gaining broader acceptance in the country, with four more states voting to legalize recreational cannabis on Tuesday and the Democrats promising to decriminalize marijuana federally if elected to the White House.

The merger also comes close on the heels of a recent announcement by larger rival Canopy Growth Corp to launch its pot-infused beverages in key U.S. markets through a partnership with Acreage Holdings Inc next summer.

While Atlanta, Georgia-based SweetWater does not sell any pot-infused beverages, it is famous for its “420” beer that smells like weed, and Aphria‘s CEO Irwin Simon said the deal helps his company raise brand-awareness in the U.S. and capitalize on future legalization at state or federal level.

A host of alcohol brands have taken stakes in cannabis companies, including Corona-maker Constellation Brands Inc which backs Canopy, but Aphria‘s purchase reverses the trend to be the first large pot producer to enter the beer market.

The deal gives the company access to a growing $29 billion craft brew market, and the company will distribute SweetWater’s 420 line and other beverages in Canada, it said in a statement.

The pot producer expects the merger to be immediately accretive to its earnings per share and is likely to close before the year-end.

Unitholders of SweetWater, which will become a wholly-owned unit of Aphria, will get $250 million in cash and about $50 million in Aphria stock. It will fund the deal with debt, new stock sales and cash on hand.

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