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Canopy Secures Future U.S. Footprint With Acreage Holdings Deal

April 23, 2019

Canadian cannabis juggernaut Canopy Growth has found an avenue into the U.S. recreational market with the announcement that it will acquire 20-state U.S. operator Acreage Holdings—pending U.S. federal legalization of cannabis.

While Canopy has a dominant position in Canada, it has been barred from the U.S. because of a Toronto Stock Exchange rule prohibiting listed companies from acquiring assets that are illegal in their local markets. Canopy and Acreage thus have agreed on a US$300 million initial payment, with the remainder to follow if and when the U.S. legalizes cannabis at the federal level. Once completed, the deal’s value will total US$3.4 billion, paid mostly in stock.

Acreage operates 87 dispensaries and 22 cultivation and processing sites in the U.S. and is notable for its brand-focused approach. It recently announced its foray into Nevada’s legal market via its own $120 million acquisition of Deep Roots Medical, whose vertically integrated business includes the Chillers and Helix Twist brands of THC hard candies and gummies, respectively, along with Bluebirds brand pre-rolls, and eponymously branded vapes, shatter, wax, and edible distillate. Acreage’s board includes former Speaker of the House John Boehner and former Canadian Prime Minister Brian Mulroney.

This is the latest in a string of acquisitions for Canopy, fueled by Constellation Brands’ $4 billion investment in the company last summer. In light of the Acreage deal, Constellation and Canopy announced they would modify certain warrants and other rights, the result of which will keep Constellation’s share of Canopy below 50% following the Acreage acquisition.—Danny Sullivan

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