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Tweed Marijuana plans to buy Bedrocan Cannabis in marijuana merger

TORONTO - Tweed Marijuana is offering to buy Bedrocan Cannabis Corp. in a friendly deal that would combine the two companies into what they say would be Canada's largest licensed pot producer.The deal was worth $61 million when it was announced early Wednesday — although the final value will vary with Tweed's stock price.The two companies say the deal would combine Tweed's consumer-oriented business and Bedrocan's base in the clinical and research communities, giving the combined operation a competitive edge in a growing marketplace that opened up in May 2014 after Health Canada updated regulations for the medical use of marijuana.Together, they have 110 full-time employees and 30 to 50 part-time workers. Tweed has two production facilities in Ontario and distributes marijuana to individual patients. Bedrocan produces and sells pharmaceutical-grade cannabis from Toronto.According to documents filed with regulators, Tweed had its first revenue little more than a year ago after its first product shipment in May 2014 and generated about $1.1 million of sales in the year ending Dec. 31, more than half of it in the final three months of last year. Bedrocan had $1.5 million in revenue over the 13 months ending last Jan. 31."This has been a stretching exercise," said Bruce Linton, Tweed's chairman and CEO. "You have to have a platform of production, you have to have an education process to bring on the physicians and you have to have something that's desired by the market."Tweed and Bedrocan are aiming to dominate a market they estimate to be worth several billion dollars a year in Canada alone, Linton said."What I really liked about the Bedrocan program is that they have a licence from the Netherlands where the medical experience has a history of 13 to 15 years. The licence enables Bedrocan Canada to begin to contemplate business in the balance of the Americas with the same or similar licence terms."He said Brazil, Chile and Uruguay are the most promising export foreign markets at this time because the product may be permissible at the federal level. In the United States, however, the federal government doesn't allow pot sales so Tweed isn't interested in the states that are allowing the product.Bedrocan CEO Marc Wayne said a recent Supreme Court of Canada decision has also opened the door for the companies to sell not only dried marijuana for smoking or inhaling, but also oils, lotions, foods and other products derived from cannabis."Which changes the game completely," Wayne said."I would not bet against a cannabis industry that is just evolving on a global level, and where you have two of the main players creating a platform to allow for us to dominate some of these areas that are developing."Under the deal announced Wednesday, Bedrocan's shareholders (TSXV:BED) would get a total of 33.9 million common shares of Tweed (TSXV:TWD), giving them 41.6 per cent of the combined company's total equity.Shares of Tweed shot up nearly 14 per cent on the TSX Venture Exchange on Wednesday, closing at $2.05. Bedrocan's stock closed at 86 cents, a leap of about 30 per cent.Follow @DavidPaddon on Twitter.

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