Canadian private sector liquor and cannabis retailer SNDL Inc. (NASDAQ:SNDL) has recently signed an agreement to acquire The Valens Company Inc. (TSX:VLNS) (NASDAQ:VLNS), a manufacturer of cannabis products, in an all-stock deal worth C$138 million. The deal with Valens is not only expected to help SNDL boost its financials but also make it one of the top players in the Canadian cannabis market.
The agreement has been signed at a time when the Canadian cannabis market is looking very promising. According to an ATB Capital Markets report, the recreational cannabis market in Canada is expected to witness a CAGR of nearly 13.4% between 2021 and 2030.
As per the terms of the agreement, the shareholders of Valens will be paid 0.3334 common shares of SNDL for each Valens share. Further, the shareholders of Valens will own about 9.5% of the combined company that will operate as SNDL Inc.
The transaction is expected to generate annual cost synergies of more than $10 million. Also, through synergies and other strategic initiatives, the deal can result in the combined company witnessing an additional EBITDA of more than $15 million annually.
Is SNDL Stock a Buy or Sell?
While analysts are cautious, hedge funds and financial bloggers look bullish on SNDL stock. On TipRanks, analysts are cautiously optimistic about SNDL stock, which has a Moderate Buy consensus rating based on two Buys and one Hold.
Financial bloggers are 94% Bullish on SNDL, compared to the sector average of 75%. Further, hedge funds have bought 306,300 shares of SNDL in the last three months, showing their confidence in the stock.
Lastly, SNDL’s average price target of $5.52 implies 100% upside potential.
What’s Ahead for SNDL?
Post the completion of the transaction, in January 2023, SNDL will be able to expand its position in the Canadian cannabis market, with a solid infrastructure consisting of 555,500 square feet of cultivation and manufacturing space, along with 185 cannabis stores under the Spiritleaf and Value Buds banners.
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