By Shariq Khan
(Reuters) - After nearly a year of next-to-no deal-making, cannabis companies are gearing up for mergers and acquisitions as realistic stock valuations and the prospect of U.S. legalization attract buyers to a sector that has been decimated by oversupply and other issues, executives and investors say.
Profitable cannabis companies want to buy their way into niche segments and expand their brands, betting that the November U.S. presidential election will lead to weed becoming legal across the United States. Distribution deals could also help companies reach consumers who have shown an increased appetite for pot products since the onset of the coronavirus pandemic.
Aphria Inc (APHA), one of Canada's largest producers, is open to making purchases if it adds a well-known consumer brand to its beverages portfolio or if it helps the company overcome a lack of chocolate production, CEO Irwin Simon told Reuters.
Canopy Growth Corp (CGC), the largest Canadian pot producer by market value, had about C$2 billion in cash at the end of June. The strong balance sheet allows it to pursue acquisitions and the current market conditions would provide frequent opportunities, a company spokesman said. Canopy is backed by Corona beer maker Constellation Brands Inc.(STZ)
ROCKY START
Since its peak in August 2018 in the run-up to Canada's legalization of recreational weed, cannabis stocks tracker MJ ETF has dropped 70%. M&A fell 80% and capital raising slumped 70% to $2.71 billion through July 31, according to the Viridian cannabis deal tracker.
