Green Thumb Industries Inc. (CSE:GTII, OTCQX:GTBIF), a Chicago-headquartered cannabis company, is interested in a potential merger with brewer Boston Beer, according to a letter seen by media outlets.
Per the letter from Green Thumb CEO Ben Kovler to Boston Beer founder Jim Koch on June 2, the combination would allow the Canadian-listed cannabis producer to also list on a major US stock exchange.
It would also help the company expand into multiple product categories including pre-rolls, edibles, drinks, vapes, concentrates and topicals, Kovler said in the letter.
Boston Beer has not commented on the report. It responded to a Wall Street Journal report last week that Japanese whisky maker Suntory Holdings is in talks to acquire the brewer that it remains “fully focused on our operations as an independent company and returning to our growth path.”
Green Thumb Industries said in a statement in response to the media speculation that “the company’s policy is not to comment on market rumors.”
Merger 'compelling,' analysts believe
Analysts at Jefferies see the merger as a “compelling” move.
“Assuming these reports are true, given Boston Beer does not want to sell the company outright, and given the impact cannabis is having on alcohol as well as the long-term growth trajectory, we think Boston Beer could be open to equity,” they wrote.
“We would also note that Boston Beer has its own foothold in cannabis with a brand known as TeaPot, which makes cannabis-infused iced tea. It debuted in 2022 and is currently available in Canada.”
The analysts highlighted that the merger would create a pathway for Green Thumb to list on a major exchange in the US.
“Being a pure-play US cannabis operator, given the current legal status of cannabis in the US, these companies are not allowed to list on a major exchange, while there are very few custodians that will hold the stocks,” they wrote.
“This, alongside compliance concerns around investing in an illegal industry, means current institutional involvement is minimal.”
They wrote that to get around this, there are now two Canadian cannabis operators and two other US MSOs that have created structures that allow listing on a major exchange.
These companies have used legal cannabis assets outside of the US as the listed vehicle. Green Thumb would be the first to use non-cannabis legal assets, the analysts pointed out.
“It would also be significant for sentiment, in our view, as it would give credibility to cannabis as a proper consumer goods sector, and also potentially open up Green Thumb to investment from traditional alcohol investors,” they wrote.
“Although it is NASDAQ that has approved such structures to date, and Boston Beer is on NYSE, it would be possible to move exchanges if NYSE is not as receptive.”
The analysts also highlighted that such a merger would allow the entity to capitalize on the growing shift from alcohol to cannabis, with it reported last week that daily cannabis use in the US has overtaken daily alcohol use for the first time.
“A merged company would also be able to capitalize on this shift in the legal business via Hemp THC beverages, which are federally legal,” they wrote.
“Hemp THC is now estimated to be an approximately $25 billion market at retail and dominated by beverages. Green Thumb could use the Boston Beer distribution to make major inroads here.”
The company’s shares traded higher on reports of the potential merger, adding 3.6% at about US$12, while Boston Beer stock traded 0.9% lower at about US$300.