Canadian Cannabis Firms Alter Australian Strategies

In the past two weeks, Canopy Growth, Cronos and Aphria have all announced significant changes in plans for their Australian operations.

After several names in the Canadian cannabis space invested early into Australia, some firms are choosing to adjust their plans with respect to the country’s burgeoning medical marijuana sector.

In the past two weeks, Canopy Growth (NYSE:CGC,TSX:WEED), Cronos Group (NASDAQ:CRON,TSX:CRON) and Aphria (NYSE:APHA,TSX:APHA) all announced a significant change in plans for their Australian operations. Aphria’s was the most recent, coming on Wednesday (October 23).

Aphria is reportedly looking to sell 37 million shares of its minority stake in Australian cannabis producer Althea Group Holdings (ASX:AGH), according to a report from Australian Financial Review.

The Ontario-based company has a total of 50.1 million shares, representing a 25 percent ownership stake in Althea.

Aphria originally invested C$2.5 million in the Melbourne cannabis firm back in 2018, allowing Aphria to sell marijuana products into Australia’s medical cannabis space.

In 2018, Althea received cultivation and manufacturing licenses and also launched its initial public offering (IPO) to list on the Australian Securities Exchange (ASX).

Cannabis giant Canopy Growth also announced it was divesting its stake in an Australia-based marijuana company.

Canopy Growth confirmed the sale of its 13.2 percent interest in AusCann Group Holdings (ASX:AC8), or over 42 million shares, ending the three-year relationship between the two firms. The company came away with C$6.3 million from the sale.

“The decision to divest our position in AusCann … will allow us to sharpen our focus on our wholly-owned operations in the market, while continuing to collaborate with our partners at AusCann,” Canopy Growth CEO Mark Zekulin said in the press release.

Cronos Group will split up with its Australian division by way of a new listing. Cronos Australia, a joint venture with NewSouthern Capital, plans to issue 40 million shares at AU$0.50 a piece ahead of its listing on the ASX, where it expects to list by November 11.

Like Aphria, Cronos plans on helping its Australian counterpart develop its position in the Australian cannabis landscape, according to Cronos Chairman and CEO Mike Gorenstein.

In a prospectus for the proposed company, it is noted that Cronos Australia seeks to lead the health and wellness space in the Asia-Pacific region, which will include export opportunities to New Zealand, though the distribution of tetrahydrocannabinol and cannabidiol products.

Medical marijuana was first legalized in the country in 2016 and since then the sector has grown. A report from Prohibition Partners projected medical cannabis in the country could be worth up to US$2.1 billion by 2028. In September, the Australian Capital Territory became the first region in Australia to fully legalize the recreational use of marijuana.

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

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