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News Alert: Constellation Invests $4 Billion In Canopy Growth, Boosting Stake In Cannabis Producer

August 15, 2018

Constellation Brands is making another major bet on the future of the cannabis category, announcing a $4 billion investment in Canada-based producer Canopy Growth, in which it already held a partial stake.

Constellation, which took an initial 9.9% interest in Canopy for $191 million last fall, is acquiring 104.5 million shares directly from Canopy Growth to take its stake to 38%. Constellation is acquiring the new shares at a price of C$48.60 ($38.08) per share, a 51.2% premium to the closing price on August 14. In addition, Constellation has acquired warrants which if exercised would take its stake to over 50%. Constellation will gain four seats on Canopy’s board as part of the deal.

Constellation says the move will allow Canopy to bolster its leadership position in the global cannabis industry, providing funds for expansion in the medical cannabis market and laying the foundation for the nascent recreational market. “Through this investment, we are selecting Canopy Growth as our exclusive global cannabis partner,” said Rob Sands, Constellation’s CEO.

Recreational sales of cannabis will begin in Canada on October 17, and other drinks players including Southern Glazer’s and Molson Coors are also gearing up to enter the category.

Constellation says it has no plans to enter the U.S. cannabis market until the category becomes legal at the federal level, a development the company believes is inevitable in the years ahead. The legalization push got a major boost earlier this summer when the Wine and Spirits Wholesalers of America came out in favor of states’ rights to legalize on the condition that cannabis is regulated like alcohol. —Daniel Marsteller

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