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Marijuana stocks including Aurora Cannabis Inc. jumped in Toronto after BNN Bloomberg TV reported Diageo PLC is holding discussions with at least three Canadian cannabis producers about a possible deal.

The British spirits maker has met with the companies in the past month as it considers a possible investment or alliance to make cannabis-infused beverages, the Canadian television station said on its website, citing people close to the situation whom it didn’t identify. One executive told BNN a deal may take months, while another said a deal may be close.

“We never comment on speculation,” a Diageo spokeswoman said in an e-mail. “As we’ve said before, we are monitoring this space closely.”

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Canada’s legalization of recreational marijuana, which begins in October, has attracted broad interest from the drinks industry. This month, Constellation Brands Inc. announced it will spend US$3.8-billion to increase its stake in Canopy Growth Corp., the biggest deal in the burgeoning marijuana industry yet. Molson Coors Brewing Co. is starting a joint venture with Hydropothecary Corp. to develop cannabis drinks in Canada.

Leamington, Ont.-based Aphria Inc. rose 6.8 per cent to $12.20 at 9:59 a.m. in Toronto, Aurora Cannabis gained 3.6 per cent to $8.32 and Canopy surged 7.2 per cent, taking its gains to six days, the longest winning streak since November, 2016. That helped drive the BI Canada Cannabis Competitive Peers Index up as much as 2.8 per cent to the highest in more than six weeks.

‘Incredible potential’

Aphria’s chief commercial officer, Jakob Ripshtein, was formerly the chief financial officer of Diageo North America and the former president of Diageo Canada Inc.

Aurora, the second-largest cannabis company by market value after Canopy, said it intends to enter the infused-beverage market.

“There is so much happening in this area right now and we think it has incredible potential,” Aurora spokeswoman Heather MacGregor said in an e-mail. “As a rule, we do not discuss business development initiatives until they are finalized, however we have a responsibility to our shareholders to give proper consideration to all relevant opportunities that are presented.”

The Marijuana and alcohol industries are increasingly seen as converging into a one-stop shop for recreation, with Heineken NV’s California-based craft brewery Lagunitas announcing in June that it was working on an India pale ale-inspired sparkling water infused with THC.

“They cannot ignore this space,” said Steve Ottaway, an investment banker who specializes in cannabis for Toronto-based GMP Securities. “How they actually get there and the construct is to be determined, but they’re coming.”

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