Canada’s Canopy Growth has secured the right to acquire U.S.-based Acreage Holdings for $3.4 billion, pending federal legalization of cannabis in the country.
“Today we announce a complex transaction with a simple objective. Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” said Bruce Linton, chairman and co-CEO of Canopy Growth.
Under the terms of the deal, which will be carried out via a court-approved plan of arrangement under the Business Corporations Act (British Columbia) once cannabis is made legal in the U.S., and approval of the deal is granted by the Supreme Court of British Columbia and the shareholders of both Canopy Growth and Acreage Holdings, Acreage will receive an immediate payment of $300 million. Additionally, Acreage’s holders of subordinate voting shares will receive 0.5818 of a common share of Canopy Growth for each Acreage Subordinate Voting Share held at the time of closing. At the point of execution of the acquisition, the total consideration payable is valued at approximately US$3.4 billion on a fully-diluted basis.
Canopy Growth has already carved out a presence in the U.S., having been the first cannabis company to list its common shares on the NYSE. Furthermore, Canopy is actively developing its U.S.-based hemp operations in parallel with its strategy to acquire Acreage Holdings.
Following the passage of the 2018 Farm Bill allowing for the commercial production of hemp, the company has been granted a license by New York State to produce and process the crop, opening the door for the company to begin plans on a Hemp Industrial Park to be located in Binghamton, in the Southern Tier region of New York.
In January of this year the company announced its plans to invest up to $150 million to establish its Hemp Industrial Park project in New York State, which will include large-scale production capacity and annual output volumes in the tons.
“In New York we see an opportunity to create products that improve people’s lives,” said Bruce Linton, co-CEO and chairman of Canopy Growth at the time. “In the process, we will create jobs in an exciting, highly profitable new industry.”
A Joining of Giants
Founded in 2013 and traded in Toronto under the ticker WEED, Canopy is the largest publicly-traded cannabis company in the world. Since the beginning, the company has built a strong IP portfolio, launched targeted R&D programs for both human and animal health, driven innovation in the legal marijuana space, and has accelerated its market leadership position. This drive has seen the company and its subsidiaries – Tweed and Spectrum Cannabis – establish a respected presence in 11 global markets.
Respectively, Acreage Holdings is a leading multi-state cannabis company, whose Board of Directors includes former Canadian Prime Minister Brian Mulroney and former Speaker of the U.S. House of Representatives, John Boehner. Owning and managing service agreements for cannabis-related licenses across 20 states, Acreage has, or has the right to develop assets including 87 dispensaries, and 22 cultivation and processing sites.
And although Canopy has made inroads into the U.S. market, this deal, once completed, would create an undisputed leader in the sector with leadership in every targeted global market where cannabis has been legalized, including the U.S., Canada, and regions of the EU, Latin America, and across Asia-Pacific.
“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 Kevin Murphy, chairman, CEO, and president, of Acreage Holdings.
The deal also will grant Acreage access to markets outside of the U.S. through Canopy, as well as access to Canopy’s stable of brands including Tweed and Tokyo Smoke, and other intellectual property.
“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.”
Until conditions are aligned for the deal to be executed, both companies will continue to operate independently, however, George Allen, the current president of Acreage, will immediately step down, and Kevin Murphy, chairman and CEO of the company, will assume the duties of president.
-Lynda Kiernan