A merger this week has created the world’s biggest cannabis company.

Tilray and Aphria have agreed to a $5 billion merger to form a new giant in the booming cannabis industry.

The all-stock deal creates an entity with an equity value of about C$4.8 billion (AU$5 billion), with the combined group's 12-month sales of C$874 million smashing industry leaders such as Curaleaf Holdings and Canopy Growth.

The new company retains Tilray's name and will trade under its ticker on the Nasdaq. Aphria shareholders will own 62 per cent of Tilray's stock under the deal dubbed a “reverse acquisition of Tilray”.

Canadian firm Aphria will pay a 23 per cent premium on Tilray's December 15 closing price of $US7.87.

“I realised that Aphria needed to expand out of Canada, and merging with Tilray was a great answer because it's a US-domiciled business with great international assets,” said Aphria chief executive Officer Irwin Simon, who will be chairman and CEO of the combined group.

The deal shows cannabis is a legitimate and lucrative sector,, with more US states legalising the products and European countries opening up to their medical use.

Tilray and Aphria's combined assets make them likely to become the world’s first global cannabis operation.