ABG is getting into the cannabis business.
Authentic Brands Group has signed a long-term, revenue-sharing deal with Tilray Inc., a British Columbia-based public cannabis company, to market and distribute consumer cannabis products for brands within the ABG portfolio.
Brendan Kennedy, president and chief executive officer of Tilray, said the idea is to extend the brands into complementary categories such as muscle wraps under the Greg Norman name, sunscreen for Spyder, muscle and joint cream for Prince or even foot creams for Nine West.
“They are all very early concepts,” he said, “but we think we’ll get product to market sometime in 2019.”
Under the terms of the deal, the products will be developed, marketed and distributed around the world where legal, with the U.S. and Canada among the first countries where the merchandise will be sold.
Canada last fall legalized cannabis for recreational use. Since that time, stores have been opening around the country. Several U.S. states, including Colorado, have also legalized the drug and cannabis wellness products are a rapidly growing market segment in Canada, the U.S., and elsewhere.
In July 2018, Tilray became the first cannabis company go public on the NASDAQ. The IPO raised $163.6 million.
In September 2018, it became the first Canadian cannabis company to legally export medical cannabis to the U.S. for a clinical trial and in December 2018, the company signed a deal with Novartis AG’s Sandoz subsidiary to sell, distribute and co-brand Tilray’s non-smokeable/non-combustible medical cannabis products in legal markets worldwide.
Kennedy said Tilray also has a deal with Anheuser-Busch to research beverages that use cannabis.
Under the terms of the ABG deal, Tilray will initially pay $100 million to ABG and up to $250 million in cash and stock in return for 49 percent of the net revenue from the sale of cannabis products from ABG with a guaranteed minimum payment of up to $10 million annually for 10 years.
This shows how committed ABG is to the lucrative cannabis market, Kennedy said.
“They really believe in it,” he said. “ABG had been looking at the cannabis industry for close to a year. They met with a lot of licensed producers in Canada. We only met with them recently but it moved very quickly. We got a deal done over the last 30 days.”
Kennedy said he expects the deal will be accretive to Tilray’s shareholders “as we reach new consumers across the entertainment, fashion, beauty, home, and health and wellness sectors. We look forward to working with ABG to bring unique and sought-after branded cannabis products to the marketplace.”
Daniel W. Dienst, ABG’s executive vice chairman, said, “Tilray’s unyielding focus on science, product quality, operational excellence and innovation has allowed them to quickly emerge as a leader in the cannabis industry. We see extraordinary potential for cannabis in the fast-growing health and wellness category — particularly for CBD products in the United States and around the world — and are excited about this long-term partnership.”
ABG declined to comment further on the deal.