What happened
Shares of Aphria (NASDAQ: APHA) soared 12% at the market open today, after the Canadian cannabis company announced it was getting into the beer industry by acquiring SweetWater Brewing Company. Shares remain up over 8% as of 10 a.m. EST.
So what
The announcement marks Aphria's entry into the United States. SweetWater, which began brewing craft beer in 1997, is the maker of the popular 420 beer brand and host of the annual 420 music festival in downtown Atlanta.
Aphria expects the $300 million acquisition to close before the end of 2020.
Image source: Getty Images.
SweetWater isn't a stranger to the cannabis consumer market. In 2018 the brewer released a new IPA called 420 Strain: G13 that, though it contains no actual marijuana, was created to smell like pot.
Now what
Besides the interest from a marijuana culture overlap, Aphria expects this acquisition to be immediately accretive to earnings before interest, taxes, depreciation, and amortization (EBITDA) and diluted earnings per share.
SweetWater is currently available in 27 states plus Washington, D.C., and Aphria says it has enough available capacity to support adding new geographical distribution locations with limited added capital investment.
SweetWater Brewing had 2019 revenue of slightly over $66 million, with production volume increasing 7% compared with 2018, according to the announcement. SweetWater founder and CEO Freddy Bensch said the combination will "create mutual opportunities for accelerated expansion into other cannabis- and beverage-related products in the U.S. and Canada."
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