Boston Beer merger with cannabis company Green Thumb seen as 'low-hanging fruit': analyst

By Steve Gelsi

Analyst Aaron Grey reiterates his buy rating on Green Thumb after cannabis company's chief executive proposes tie-up with the parent of Samuel Adams beer

A proposal from Green Thumb Industries Inc. Chief Executive Ben Kovler to merge his company with Boston Beer Co. would capitalize on growing cannabis consumption as some alcoholic-beverage sales drop, an analyst said Monday,

"The merger could provide exposure [for Boston Beer] to one of the leading companies in the growing cannabis space," said Alliance Global Partners CEO Aaron Grey, who reiterated a buy rating on Green Thumb Industries (GTBIF).

A merger with Boston Beer (SAM), parent company of Samuel Adams beer, would provide Green Thumb a listing on the New York Stock Exchange, a change from its current position on the more thinly traded Canadian Securities Exchange and the over-the-counter bulletin board that would open up its stock to a wider shareholder audience, Grey said.

"This would likely help increase institutional ownership and custody issues that continue to plague the industry," he added.

Given that cannabis remains illegal under U.S. federal law, it's possible that Green Thumb's profits or losses would not be combined with those of Boston Beer Co., resulting in a structure that could resemble that of Canopy USA, a unit of Canopy Growth Corp. (CGC), Grey said.

Combining with Green Thumb would provide Boston Beer with "lower-hanging fruit" than tie-ups with other cannabis companies such as Tilray Brands Inc. (TLRY), which is already pushing into the U.S. beer market with its purchase of Montauk Brewing Co. and other beverage brands, he said.

It all depends on whether Boston Beer founder Jim Koch is amenable to a deal through his controlling ownership of the company via its Class B shares, Grey said.

Boston Beer has already made a push into cannabis-infused drinks with the launch of the TeaPot THC beverage in Canada, Grey said.

Kovler has posted his June 2 letter to Boston Beer on his X account.

"We think the combination of [Boston Beer] and Green Thumb is a powerhouse of brands designed to serve the future U.S. consumer," Kovler said.

Kovler praised the beer company for its leadership role in the craft-beer and hard-seltzer movements and said the combined company would have about $3.1 billion in revenue.

At last check, Green Thumb's stock has a combined market value of about $2.9 billion, and Boston Beer's was worth about $3.5 billion.

Boston Beer's stock is down 15.5% so far in 2024, while Green Thumb's has risen by 7.9%.

Also read: Trulieve, Green Thumb, Verano stocks rise on stronger-than-expected cannabis revenue

-Steve Gelsi

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06-10-24 1542ET

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