iAnthus and MPX Bioceutical agree to first public-to-public merger transaction in US cannabis history
By Alexis Grace
Oct 24, 2018
Last Thursday iAnthus Capital Holdings, Inc. (CSE:IAN) (OTCQX:ITHUF) and MPX Bioceutical Corporation (CSE:MPX) (OTC:MPXEF) announced they would merge in an all-stock transaction, marking the first time in history that two publicly traded cannabis companies in the U.S. will merge. The agreement specifies an exchange ratio of 0.1673 common shares of iAnthus for each common share of MPX held by MPX shareholders, with the deal yielding a valuation of CAD$835 million for MPX Bioceutical Corporation.
Based on the agreement, the deal implies a value of CAD$1.28 per MPX common share which puts the stock price at a premium of 30.6 percent based on the October 17 MPX closing price of CAD$0.98.
The announcement occurred in the early morning hours last Thursday, causing a sharp increase in trading volume at the market open which quickly pushed the stock price to CAD$1.26 by 10:30 AM EST. The stock closed at CAD$1.19 Thursday and was down to CAD$1.14 when the market closed Friday. Overall, MPX was up 21.51 percent last week while iAnthus was down 0.13 percent. While both stocks jumped in value immediately following the announcement, based on the trading activity, it appears as though investors might perceive the merge as a better deal for MPX than for iAnthus.
The transaction resulted in a merged company with a presence in 10 U.S. states which, according to research by ArcView Market Research and BDS Analytics as mentioned in the announcement, are projected to generate approximately $16.2 billion in yearly cannabis sales by 2022 in those 10 states combined.
The acquisition presents opportunities for both iAnthus and MPX to own a larger share in the growing market.
Both companies have similar visions in their desire to grow in an adolescent marijuana market. Currently, iAnthus Capital Holdings, Inc. owns and operates cannabis cultivation, processing and dispensary facilities which are licensed in six states within the United States. According to the company, they target vertically integrated cannabis operations in high growth markets.
Similarly, MPX Bioceutical Corporation focuses on the medical and adult use cannabis markets with a growing presence in the U.S. Before the acquisition; they had plans in the works to build 10 dispensaries and four production facilities in four states in addition to the facilities operating in five states already. They also have a production facility under construction in Canada and a pending license application to service Health Canada.
The CEOs of the companies both expressed their satisfaction with the transaction and are excited for the opportunities the merger will present. CEO of MPX, Scott Boyes, stated the importance of growing their footprint early on, noting that combining with iAnthus will provide them with major exposure to the sector.
“MPX is committed to providing the strongest value possible to our shareholders, and we feel that working with a best-in-class operator like iAnthus provides us with the best opportunity to achieve that goal,” said Scott Boyes, Chief Executive Officer of MPX in a statement. “The nascent U.S. cannabis market is still in a land-grab phase, and we feel that our footprint when combined with iAnthus, provides our investors with the strongest possible exposure to this explosive marketplace.”
Both companies saw strong returns in the past six months and beat the overall marijuana market as measured by ETFMG Alternative Harvest ETF (NYSEArca:MJ) returns. iAnthus yielded a 78.33 percent return, MPX a 52.00 percent return, and MJ a 33.59 percent return over the past six months.
The merger follows last week’s news of MedMen Enterprises Inc. (CSE:MMEN) (OTCQB:MMNFF) acquiring PharmaCann LLC, and some think iAnthus and MPX executed the merger with the intention to compete with MedMen’s approach of becoming “the biggest weed play in America.”
iAnthus holds similar assets as MedMen, albeit with a smaller market capitalization, but reportedly is less top-heavy than MedMen which has large executive compensation plans with voting rights held by the company’s leadership rather than by shareholders. iAnthus, on the other hand, gives voting rights to shareholders which could make for a more appealing investment by marijuana stock market investors.
Based on the recent mergers and acquisitions, this could be the route cannabis companies will continue taking to move ahead and gain a larger market share early on. It might cause smaller marijuana companies to be pushed out of the market, leaving only the strongest to survive as industry giants.