Canopy Growth Corporation Secures Right to Buy Acreage Holdings

Canadian cannabis company Canopy is positioning itself to be a prime mover in the U.S. legal marijuana market, last week announcing an agreement to acquire Acreage Holdings in a deal valued at $3.4 billion.

The deal, the first between two cannabis companies on either side of the U.S.-Canada border, gives Canopy the right to acquire 100 percent of New York-based Acreage when marijuana is legalized on a federal level by the U.S. government. The agreement can be called off if that does not occur within 90 months of the cash payment, which would be sometime in 2027.

“Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” said Bruce Linton, Canopy’s chairman and co-chief executive, in a statement. “By combining Acreage’s management team, licenses and assets with Canopy Growth’s intellectual property and brands, there will be tremendous value creation for both companies’ shareholders.”

Founded in 2014, New York-based Acreage holds cannabis licenses in 20 states, where it operates 87 dispensaries and 22 cultivation and processing sites. The company went public on the Canadian Securities Exchange in November and counts former Speaker of the U.S. House of Representatives John Boehner and former Massachusetts Governor Bill Weld as members of the company’s board of advisors.

Beer and liquor conglomerate Constellation Brands, Canopy’s majority shareholder, waived its rights to veto the deal. In a press release, the company announced it had agreed to modifications to certain warrants and other rights as a result of Canopy’s deal with Acreage. Should Canopy execute its option to purchase Acreage, Constellation’s stake in the former is not expected to exceed 50 percent.

Acreage will also enter licensing agreement granting it access to Canopy Growth brands such as Tweed and Tokyo Smoke.

“Having access to Canopy Growth’s deep resources will enable us to innovate, develop and distribute quality cannabis brands across the U.S. and continue expanding our U.S. footprint,” said Acreage Holdings chief executive Kevin Murphy in a statement. “At the same time, a confluence of factors are making it much more difficult for a multi-state operator to achieve its full potential, including the enormous amount of cash required to scale.”

According to cannabis market research group BDS Analytics, legal sales of cannabis in North America are expected to reach $24.2 billion by 2021.

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