Tilray Brands Inc. shares jumped the most since February 2021 after the cannabis and consumer packaged goods company agreed to buy eight beer and beverage brands from the owner of Budweiser.

Tilray will purchase Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company and HiBall Energy from Anheuser-Busch InBev, the company said. The US$85 million all-cash deal will make Tilray the fifth largest craft beer business in the U.S., up from ninth, it added. 

“These beer and beverage brands possess the hallmarks of strong consumer loyalty and further diversify Tilray’s growing U.S. beverage alcohol segment,” the company said.

Shares of Tilray surged 36 per cent Tuesday, while U.S. shares of AB InBev fell 0.2 per cent.

Wall Street sees it adding meaningful near-and long-term value to Tilray. Jefferies analyst Owen Bennett estimates the to-be-acquired brands will add around US$180 million in sales for Tilray. In fiscal 2023, Tilray’s total net sales were US$627.1 million.

The acquisition “marks a major step forward in our diversification strategy,” Chief Executive Officer Irwin Simon said in a press statement. The deal is expected to close by the end of September, according to Tilray’s 8-K filing.

The portfolio of beverages to be acquired from AB InBev adds to Tilray’s current beverage brands of SweetWater Brewing Company, Montauk Brewing Company, Alpine Beer Company and Green Flash Brewing Company. Tilray also owns Breckenridge Distillery and Happy Flower CBD sparkling non-alcoholic cocktails.

“We expect today’s acquisition triples the size of our already fast-growing beverage alcohol segment from 4 million cases to 12 million cases annually,” said Simon on a conference call.

Longer term, Bennett sees the beverage deal benefiting Tilray’s cannabis business in the U.S. “It creates a distribution network that can be used for cannabis brands upon legalization,” he said in a note. 

Additionally, the deal can have more of an impact “when one considers alcohol is increasingly being substituted for cannabis,” Bennett added. 

While Tuesday’s surge helped Tilray shares erase their losses for 2023, the stock is still down roughly 80 per cent over the last two years. Uncertainty over the state of a key cannabis banking bill as well as questions over when or if weed will be legalized on the federal level in the U.S. have been a major headwind for pot stocks, with the ETFMG Alternative Harvest ETF falling about 23 per cent this year.

As for AB InBev, the Brussels-based brewer reported second-quarter net sales of US$15.1 billion, up just 2.2 per cent year-over-year. Still, the report was seen as better than feared, by some, including Investec analyst Alicia Forry, as AB has been grappling with declining Bud Light sales in the U.S. due to a consumer backlash stemming from a Bud Light promotional video that featured transgender social media personality Dylan Mulvaney. U.S. shares have fallen 16 per cent since March 31 as a result.