Marijuana M&A is already hot in 2019, with a pot tech-vape tie-up worth $210 million

Jeremy Berke

Jan 4, 2019, 04:30 IST

Marijuana M&A is already hot in 2019, with a pot tech-vape tie-up worth $210 million

Courtesy of inkhouse

Jupiter Research's vaporizer pens.

TILT Holdings, a publicly-traded marijuana company, said it is buying vaporizer company Jupiter Research for $210 million in cash and stock.
The acquisition allows TILT to go after a new category - and one that represents "exponential growth" TILT executive Joel Milton said in an interview with Business Insider.
TILT was created out of a four-way merger in May and went public on the Canadian Securities Exchange in December.

It's 2019, and the marijuana M&A market is already heating up.

Cannabis technology company TILT Holdings on Thursday signed an agreement to acquire Jupiter Research, a vaporizer-maker, for $210 million in cash and stock.

"We never expected to acquire a hardware company," Joel Milton, TILT's senior vice president of software and services told Business Insider in an interview.

But when Milton and TILT's CEO, Alex Coleman, met with Jupiter's CEO, Mark Scatterday, "we were really impressed with what they were doing," said Milton.

That, coupled with the "exponential growth" vapes offer made Jupiter a nice fit within TILT's arsenal, said Milton.

Jupiter booked over $100 million in orders last year, up from under $25 million in 2017, according to a December note from Canaccord Genuity.

The deal is expected to close in the "near future," said Milton.

A 'B2B approach' to marijuana

TILT was created out of a four-way merger between marijuana software company Baker Technologies - where Milton served as CEO - with Briteside Holdings, Sea Hunter Therapeutics, and Santé Veritas Holdings in May 2018.

The combined entity went public via a reverse merger on the Canadian Securities Exchange (CSE) last December and began to roll-up other marijuana companies shortly after.

"We're a little differentiated from some of our other peers in the market in that we take a much more B2B (business-to-business) approach in terms of how we look at the industry," Milton said.

Whereas other US-based marijuana companies, known as multi-state operators, are focused on acquisitions that expand their geographical retail presence, TILT is focused on supplying software and services - and now hardware - to marijuana dispensaries.

TILT acquired Blackbird, a marijuana distribution and software company in December.

"So rather than solely focused on opening retail stores, we're really focused on providing solutions to the whole industry," Milton said, adding that the Jupiter acquisition is an "unbelievable" way to expand TILT's reach into a new category.

"When you look at the data within the states [where marijuana is legal], vaporizers are growing rapidly," Milton said. "When you have that growth within a market over time plus new markets, you get exponential growth. And quite frankly we have really, really high expectations for what the vaporizer market's going to look like."

Vape companies, whether used for marijuana or otherwise, have been prime acquisition targets in recent weeks. Altria, the tobacco-maker behind Marlboro, sank $12.8 billion into a 35% stake of Juul, a popular e-cigarette maker in December.

Marijuana is legal in Canada and for adult use in 10 states, and medical use in 33. In December, New York Governor Andrew Cuomo said legalizing the adult use of marijuana is one of his top legislative priorities for next year.