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Aphria Inc (TSX:APHA) Targeted with Takeover Attempt by U.S. Company

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Aphria Inc (TSX:APHA)(NYSE:APHA) is in the cross hairs of U.S. cannabi company Green Growth Brands Ltd (CNSX:GGB). Although the company initially tried to play nice and looked for a friendly deal to negotiate with Aphria, the two could not come to an agreement. And so Green Growth has decided to go the hostile route and pitch its offer straight to Aphria investors.

The deal involves no cash (of course) and would be a trade of shares. Aphria shareholders would get about 1.57 shares of Green Growth in exchange for one of their shares. It amounts to around $11 per share for Aphria’s stock. That sounds like a deal given that Aphria closed at only $7.57 as of Thursday, so it would be a big 45% premium for shareholders.

It sounds great, except that Aphria’s stock has plummeted 60% in just the past three months. Before legalization in Canada, Aphria was trading at around $20 a share.

Given that Aphria could recover from this, investors might not want to jump over this deal just yet. After all, with the U.S. legalizing hemp-derived cannabidiol, we could see more U.S. companies getting involved in the cannabis industry. That means there could be more potential suitors for Aphria in the weeks and months to come.

All in all, the timing couldn’t be worse for Aphria investors to take this deal. The stock is at a low, and the “premium” would be nowhere near the stock’s 52-week high.

I’m not convinced that pot stocks won’t see another boom, especially once edibles get legalized sometime during 2019. There’s still plenty of hype that could send Aphria back up in price, making this a bad deal for shareholders today.

Jim Dibble has no position in any of the stocks mentioned in this post. This post is only an individual opinion and investors should not use or rely on it when making a decision to buy the stock.