Tilray Pops 24% Amid Report On Merger Talks With Aphria; Analyst Says Hold

Shares of Tilray jumped 23.8% in Tuesday’s extended market trading after Bloomberg reported that the company is in advanced merger talks with Aphria (APHA).

A deal could be announced as early as this week, Bloomberg has learnt. Per the report, the combined company is expected to retain the Tilray (TLRY) name while Aphria’s CEO Irwin Simon is likely to be appointed as CEO of the new company. If the deal goes through, the combined company will hold a 19% share in the Canadian recreational cannabis market with annual revenue of C$930 million.

The merged company will relocate its headquarters to the United States, according to the report. Moreover, the merger is likely to save up to C$100 million as a result of annualized cost synergies of the combined company. (See TLRY stock analysis on TipRanks)

Following the report, MKM Partners analyst William Kirk reiterated his Hold rating and a price target of $8.50 (8% upside potential). Kirk listed some benefits of a potential merger including increased sales, access to European markets and balance sheet improvement. The analyst also highlighted reasons against the deal including overstated synergy expectations, unaddressed inventory surplus, and consolidation of top players in Canada could be difficult.

Overall, the Street is sidelined on the stock. The Hold analyst consensus is based on 5 Holds, 1 Buy and 2 Sells. The average price target stands at $9.01 and implies upside potential of about 14.5% to current levels. Shares have dropped by 54.1% year-to-date.