Since the legalisation of cannabis in Canada, the plant has become the centre of a booming industry spanning farming and research.
There's long been talk around the merchandising business of cannabis, with industry speculators suggesting it was only a matter of time until its potential in the consumer products space was realised.
The US outfit, Authentic Brands Group has taken a further step in its development with a new partnership with the global pioneer in cannabis production and distribution Tilray.
Together, the pair has signed a long-term revenue sharing agreement to market and distribute a portfolio of consumer cannabis products within ABG's brand portfolio in jurisdictions where regulations permit.
As the owner of more than 50 brands, ABG builds value by partnering with an expansive network of manufacturers, operators and retailers.
With a global retail footprint of over 100,000 points of sale and more than 4,500 branded freestanding stores and shop-in-shops, ABG’s portfolio generates approximately US$9 billion in retail sales annually.
Under the terms of the agreement, the pair will develop, market and distribute consumer cannabis products across the world as and where legal with a focus on the US and Canada.
- Tilray will be supplying active cannabinoid ingredients for such products. The company will initially pay $100 million and up to $250 million in cash and stock to ABG subject to them hitting certain commercial milestones.
- Tilray will have the right to receive up to 49 per cent of the net revenue from cannabis products bearing ABG brands, with a guaranteed minimum payment of up to $10 million annually for ten years.
'Through this agreement, ABG and Tilray join forces at the intersection of science and brand to connect consumers with innovative health and wellness products suited to their many lifestyle needs,' read a statement.
“We are thrilled to partner with ABG, a global leader known for expertly managing and marketing an owned portfolio of iconic brands,” said Brendan Kennedy, Tilray president and CEO.
“As we work to expand Tilray’s global presence, this agreement leverages our complementary strengths and will be accretive to our shareholders as we reach new consumers across the entertainment, fashion, beauty, home and health and wellness sectors.
"We look forward to working with ABG to bring unique and sought-after branded cannabis products to the marketplace.”
Daniel W. Dienst, ABG executive vice chairman, added: “Tilray’s unyielding focus on science, product quality, operational excellence and innovation has allowed them to quickly emerge as a leader in the cannabis industry.
"We see extraordinary potential for cannabis in the fast-growing health and wellness category – particularly for CBD products in the United States and around the world - and are excited about this long-term partnership.”
Tilray’s financial advisor on the transaction was BofA Merrill Lynch. Authentic Brands Group’s legal advisor on the transaction was Paul, Weiss, Rifkind, Wharton & Garrison LLP.