It looks like Canadian cannabis player Tilray is very optimistic about U.S. legislation on the plant that it has acquired a majority stake in Medmen.

California-based MedMen owns and operates 25 retail stores and expects to open more than five more this year. The company’s market value is less than $200 million right now but was more than $600 million in 2019.

Shares of Tilray soared almost 5% in after-hours trading on Tuesday as Wall Street absorbed the news.

The $165.8 million deal is expected to give Tilray a footprint throughout the U.S., if cannabis is legalized at the federal level.

As part of the deal, the company acquired 75% of Medmen’s outstanding secured convertible notes and 65% of its outstanding warrants for $165.8 million. Once converted into stock, Tilray will have a significant stake in Medmen.

“What Medmen does for Tilray is that it gives us a great brand. Ultimately, once legalization happens, it gives us the potential to own a great company that we can ultimately take into the rest of the world,” said Irwin Simon, Tilray’s chairman and CEO, on CNBC’s “Closing Bell.”

“The investment we are announcing in MedMen securities today, one of the most recognized brands in the $80 billion U.S. cannabis market, is a critical step toward delivering on our objective as we work to enable Tilray to lead the U.S. market when legalization allows,”Simon said in a statement.

“Our management team has spent the past 18 months executing a disciplined turnaround plan,” MedMen CEO Tom Lynch said in a statement. “We are grateful to our stakeholders for their patience and support as we worked to fix the business and rebuild trust and credibility.”


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