(Reuters) - Shares of Canadian cannabis firm Tilray Inc rose as much as 7 percent on Wednesday after announcing a deal to buy hemp food maker Manitoba Harvest for up to C$419 million ($318 million) as it seeks to gain a foothold in the lucrative business.
The deal comes after the U.S. farm bill, which legalized commercial production of hemp in the country, opened access to a large market for Tilray and its peers.
Manitoba Harvest, which is majority owned by Compass Group Diversified Holdings LLC, and Tilray will develop wellness products and hemp-based consumer food products.
Hemp is a type of cannabis plant with no or extremely low concentrations of the psychoactive compound known as THC, the ingredient in marijuana associated with “high” feelings.
The cash and stock deal helps Tilray expand beyond the food category, including extracts giving access to a broad portfolio of products currently distributed in 16,000 stores across North America said analysts at Cowen and Co.
Tilray will initially pay C$277.5 million in cash and stock at the close of the deal, expected within the next 30 days. The remainder will be paid six months after closing and on achieving certain milestones.
Compass Diversified Holdings’ shares were also up 3 percent at $16.15.
($1 = 1.3170 Canadian dollars)
Reporting by Shanti S Nair in Bengaluru; Editing by Shailesh Kuber