Prince Tennis Gear Could Feature CBD Under Tilray Deal

(Bloomberg) -- Pot firm Tilray Inc. is adding a third company to its growing roster of global partnerships, announcing a revenue-sharing agreement with Authentic Brands Group LLC, owner of more than 50 brands ranging from Nine West shoes to Prince tennis gear.

The deal will see ABG market and distribute cannabis products supplied by Tilray with a particular focus on cannabidiol, or CBD, in the U.S. Nanaimo, British Columbia-based Tilray will pay an initial $100 million to ABG and a further $250 million in cash and stock subject to the achievement of certain commercial and regulatory milestones.

In return, Tilray will get up to 49 percent of the revenue generated from cannabis product sales with a guaranteed minimum payment of up to $10 million annually for 10 years. ABG brands are available at more than 100,000 outlets and more than 4,500 freestanding stores across the world, including in Canada and Europe, and generate approximately $9 billion in retail sales annually.

“We think this enables us to grab retail real estate in a hurry in the United States, grab consumer mind share in a hurry,” Tilray Chief Executive Officer Brendan Kennedy said in a phone interview from Orlando, Florida.

Tilray shares fell 4.4 percent in pre-market trading. A post-IPO lockup expires Tuesday, freeing about 66 million subordinate voting shares for trading. However, Tilray’s largest shareholder Privateer Holdings Inc., which owns about 76 percent of the company’s stock, said last week that it won’t sell in the first half of 2019.

Other companies that have expressed interest in creating CBD-infused products rose pre-market, with Alkaline Water Co. up 8.5 percent and New Age Beverages Corp. gaining 5.1 percent.

Banks Catch Up

Examples of potential CBD-infused products provided by the two companies include Greg Norman whey protein, Nine West foot cream and an elbow brace from tennis brand Prince. The U.S. legalized hemp-derived CBD last month as part of the farm bill. CBD doesn’t get you high but is said by its proponents to have relaxing and anti-inflammatory properties.

Similarly, Green Growth Brands Inc. last week announced a partnership with shoe retailer DSW Inc. to sell CBD foot creams and other items at 96 DSW stores across the U.S.

The deal follows on the heels of Tilray’s recent global partnerships with Swiss drug giant Novartis AG to develop and distribute medical marijuana, and with Budweiser brewer Ahneuser-Busch InBev NV to conduct research into cannabis-infused beverages.

“Companies with trusted brands and a multi-national supply chain will be the companies that win in the cannabis industry, win with patients and consumers and win with governments and regulators around the world,” Kennedy said.

Bank of America Merrill Lynch was Tilray’s financial adviser for the transaction. The bank also acted as a book-runner for Tilray’s debt offering in October together with BMO Capital Markets and Cowen Inc.

The biggest U.S. banks have been reluctant to touch the cannabis sector, as the drug remains banned at the federal level despite legalization in several states. But Kennedy believes it’s only a matter of time before other large banks follow suit.

“We’ve talked to every major global investment bank at this point and they all feel like they’re behind and they’re all trying to catch up,” he said. “The banks see this opportunity as massive and inevitable and they’re terrified of missing out.”

To contact the reporter on this story: Kristine Owram in Toronto at kowram@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Carlos Caminada, David Scanlan

©2019 Bloomberg L.P.