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Canopy Growth Unveils New Canopy USA Holding Company Intended To Accelerate U.S. Business

October 25, 2022

Canopy Growth is aiming to “fast-track” its entry into the U.S. with a new plan to open a separate Canopy USA unit that can combine its U.S. holdings and accelerate its progress in the cannabis market despite ongoing federal prohibition. Altogether, Canopy’s U.S. presence will extend to 21 states, and include previously announced acquisitions like Acreage Holdings, Wana edibles, and Jetty vapes and extracts, which have been on hold pending federal legalization.

Under the plan, which is subject to shareholder approval, Canopy Growth will have two designees on the four-person board of managers of Canopy USA, but will not hold a direct interest in any shares or interests in Canopy USA holdings Acreage, Wana, Jetty, or TerrAscend. Canopy agreed to acquire Acreage pending federal legalization in 2019, and added an option to buy Wana for $300 million last year and a $69 million play for Jetty earlier this year.

“As the growth of the U.S. cannabis market continues rapidly at the state level, this strategy enables us to take control of our own destiny,” said Canopy CEO David Klein. “We expect to unleash the full power of Canopy’s scalable and ideally-positioned U.S. cannabis ecosystem to unlock potential expansion opportunities. This strategy and positioning are true differentiators, which we expect to enable our investors and brands to realize value in the near term while positioning Canopy for profitable growth and a fast start upon U.S. federal permissibility.”

As Canopy looks to consolidate and accelerate its U.S. business, Constellation Brands, which owns about 36% of the Canadian company, announced this morning that it plans to “transition existing common shares ownership interest in Canopy Growth into new exchangeable shares, protecting Constellation shareholder value while retaining an interest in Canopy Growth through non-voting and non-participating shares.” Constellation also intends to surrender warrants through which it could have further expanded its ownership of the cannabis player.

“We believe that the conversion of our ownership interest will maintain Constellation’s ability to realize the potential upside of our investment in Canopy,” said Bill Newlands, Constellation president and CEO. “At the same time, this transaction and the surrender of our warrants are expected to eliminate the impact to our equity in earnings, mitigate risk to our organization, and further reinforce our intent to not deploy additional investment in Canopy.”

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