In a bold move, Tilray announced its plan to acquire several beer and beverage brands from Anheuser-Busch InBev for an all-cash deal of $85 million. This acquisition will see Tilray ascend the ranks, making it the fifth-largest craft beer business in the U.S., a significant leap from its previous ninth position.
Among the brands set to transition to Tilray are Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy.
Tilray expressed enthusiasm about the acquisition, emphasizing that these brands have demonstrated consistent consumer loyalty. They believe that these additions will enhance the diversity of their burgeoning U.S. beverage alcohol segment.
Following this announcement, Tilray’s shares experienced an impressive 36% upswing on Tuesday. However, U.S. shares of AB InBev witnessed a modest decline of 0.2%.
Financial analysts from Wall Street forecast this acquisition to be a significant value addition for Tilray in both the immediate and long-term contexts. Owen Bennett, a noted analyst from Jefferies, predicts that these new brands will generate an approximate $180 million in sales, noting that Tilray’s net sales in fiscal 2023 amounted to $627.1 million.
Irwin Simon, Tilray’s CEO, lauded the acquisition, stating it as a significant milestone in their business diversification strategy. This new acquisition complements Tilray’s existing beverage brand portfolio, including SweetWater Brewing Company, Montauk Brewing Company, Alpine Beer Company, and Green Flash Brewing Company. Moreover, they also own Breckenridge Distillery and Happy Flower CBD sparkling non-alcoholic cocktails.
Simon further projected a tripling of their beverage alcohol segment, estimating an annual output of 12 million cases, a significant increase from the previous 4 million.
Bennett believes that in the long run, this acquisition can boost Tilray’s cannabis segment in the U.S. He envisions the potential of utilizing the established distribution network for cannabis products upon its legalization. Bennett also emphasized the increasing trend of substituting alcohol for cannabis, indicating more growth potential for Tilray.
Despite the recent surge, Tilray’s shares have faced a decrease of about 80% in the past two years, attributed to the uncertainties surrounding cannabis legalization in the U.S.
On the other hand, AB InBev reported an increase of 2.2% in their net sales year-over-year, touching $15.1 billion. Despite the growth, the brand has faced challenges, including a decline in Bud Light sales in the U.S. following a controversial promotional video.
Stock Outlook: One Week: Observers can expect Tilray’s shares to stabilize after the recent surge, while AB InBev might continue to see slight fluctuations due to market reactions. One Month: With the acquisition’s completion nearing, Tilray might see further positive market reactions. However, the broader challenges facing the cannabis sector and AB InBev’s brand perception issues may introduce volatility.
