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The cannabis industry represents a huge growth opportunity for not just investors, but companies in other industries as well. But due to the federal ban on pot, many companies shy away from trying to collaborate or engage in mergers and acquisitions with marijuana producers.

However, rumors are swirling that there could be a fairly significant deal on the horizon, one which involves a major pot producer and a top brewer. If it ends up happening, it could become a game changer for the cannabis industry, perhaps even paving the way for more companies to end up following suit.

Boston Beer and Green Thumb to merge?

Boston Beer (NYSE: SAM), the company behind the popular Samuel Adams brand of beer, is reportedly in discussions about merging with cannabis producer Green Thumb Industries (OTC: GTBIF). A report from the The Wall Street Journal suggests that Green Thumb is expected to make an offer for Boston Beer, which would see the two companies merge.

With its $3.5 billion in market value, Boston Beer is the larger of the two companies, with Green Thumb's valuation right around $2.9 billion. And there could be a lot of potential for the businesses to get much larger, as the cannabis beverage market is an enticing one, with analysts at Fortune Business Insights projecting that it will grow massively from just $3 billion in 2024 to more than $117 billion by 2032 -- rising at a compound annual growth rate of 57.5% during that stretch.

Green Thumb, however, has issued a release saying that it doesn't comment on rumors.

Why the deal might not be a slam dunk

The biggest obstacle to any deal -- if there is one -- is that marijuana remains federally banned in the U.S. And that's why a pot stock such as Green Thumb can't trade on a major exchange such as the NYSE or the Nasdaq. The rescheduling of cannabis from a Schedule I substance down to Schedule III, assuming it ends up happening, could help lower the tax bill for pot producers and make it easier to research cannabis, but it falls short of legalization and may not lead to cannabis companies being able to trade on a top U.S. exchange.

If that's the case, it could be difficult to see a merger happening as it would mean the combined entity likely wouldn't be able to trade on the NYSE -- and Boston Beer shareholders may not be thrilled with that prospect. While there are Canadian-based cannabis stocks that trade on the Nasdaq, it's because pot isn't illegal in Canada (it was legalized in 2018). But for U.S.-based cannabis stocks, the federal ban prevents them from trading on a top U.S. exchange.

Despite the potential synergies that could be achieved from Boston Beer and Green Thumb merging, it may not be an easy deal to pull through. It could end up being an informal one, similar to the agreement Canadian-based Canopy Growth reached with Acreage Holdings, a multi-state operator in the U.S., back in 2019, where they agreed in principle to combine their businesses once it was federally permissible to do so.

It was just this year that Canopy Growth moved ahead with exercising that option. But even in that situation, it does not consolidate the businesses, and it utilizes a separate special purpose vehicle, Canopy USA, to complete the deal.

A huge catalyst for Green Thumb if it happens

Green Thumb has been one of the better-performing cannabis stocks in recent years. Not only has it been growing, but it's also profitable -- a rarity in the industry. Year to date, however, it's up a modest 8% thus far. By merging with Boston Beer, even if it comes with an asterisk, and it's a pending one based on legalization in the future, it could shine a spotlight on the cannabis industry, and Green Thumb in particular.

It's risky to invest in cannabis, and potentially even riskier to invest based on the hopes of a rumored deal. But with Green Thumb a profitable company and a leading marijuana producer, it's one of the safer stocks to buy and hold if you're bullish on marijuana legalization.

Even if the deal with Boston Beer doesn't materialize, there could be many more opportunities down the road, given Green Thumb's strong position in the industry. There's a lot of growth potential in cannabis in the long run, and this can be a good stock to buy right now, provided that you're OK with some volatility and uncertainty.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boston Beer and Green Thumb Industries. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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