Canopy Growth Corp is already one of the biggest players in the emerging sector of cannabis production, and they just inked a deal that is set to make them a whole lot bigger.
The Canadian-based cannabis giant is set to buy their U.S. based competitor, Acreage Holdings, in a deal valued around $3.4 billion US. The deal will only officially go through once (and if) cannabis is fully, federally legalized in the United States. Due to the rules of the Toronto Stock Exchange, where Canopy is publicly listed, they cannot buy interest in a company whose business s illegal, and, technically speaking, Acreage’s still is. So in a sense, they’re buying the right to acquire Acreage at a future date.
The deal gives CGC major inroads into the U.S., where they hope legalization will create a major market for their products. Acreage is not the first U.S. business in which Canopy has invested. They have purchased warrants in Slang Worldwide Inc., and their investment subsidiary, Canopy Rivers Inc., owns some other interests as well.
The deal is mutually beneficial, as the purchase gives Acreage expanded reach in the U.S. market, and the ability to cross state lines with their business more easily.
“From the first day we created our company, providing exceptional customer care and delivering shareholder value have been our top priorities. This transaction will help accomplish both,” said Acreage CEO Kevin Murphy. “When the right is exercised 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.”
Canopy is clearly benefitting as well. Their stock (NYSE: CGC) jumped by almost four dollars over night, and is up 7.84 percent on the day, as of this writing.