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Canopy Growth to buy Acreage Holdings in US$3.4B Deal

Canopy Growth Corp. (WEED.TO 4.43%) plans to acquire U.S. marijuana operator Acreage Holdings Inc. (ACRGu.CD) in a blockbuster deal that would create a North American cannabis powerhouse – but only when it becomes legal to do so.

The deal, which is believed to be the first of its kind, ties up two major cannabis players in the U.S. and Canada in an arrangement that will only be consummated when ​U.S. federal law formally recognizes the states that have legalized marijuana. That milestone would allow pot companies listed on the Toronto Stock Exchange, which currently restricts issuers from owning assets in jurisdictions where marijuana isn’t legal, to acquire cannabis assets in the United States.

Under the terms of the agreement announced Thursday, Canopy will make a US$300-million payment once the arrangement is approved by shareholders. If Canopy exercises its right to proceed with the takeover, Acreage shareholders will receive 0.5818 of a Canopy share for each share held. The total value of the agreement is US$3.4 billion.

Canopy will also provide Acreage with the ability to market its various brands including Tweed and Tokyo Smoke along with other intellectual property.

The acquisition “means everywhere we have to be, we’ll be there with a leading position,” said Bruce Linton, chief executive officer of Canopy Growth, in an interview with BNN Bloomberg.

Bloomberg News was first to report discussions between Canopy and Acreage Wednesday afternoon, citing people familiar with the matter.

Canopy shares rose 4.43 per cent, or $2.53, to end the trading day at $59.64 on the Toronto Stock Exchange. The company’s New York-listed shares were up 3.9 per cent, or US$1.71, to US$44.56. Acreage shares closed 14 cents lower at $22.35 on the Canadian Securities Exchange.

Once Canopy is allowed to acquire Acreage, the Smiths Falls, Ont.-based company would have access to at least 20 U.S. states – a market currently valued around US$17 billion – where Acreage operates to sell its range of dried cannabis products as well as pot-infused edibles and extractables such as its upcoming beverage line.

The tie-up with Acreage would mark another major breakthrough for Canopy less than a year after Constellation Brands Inc. made a $5-billion investment for a 38 per cent stake in the Canadian pot producer. Constellation’s investment – which also includes warrants that could push its stake to a controlling interest – remains the biggest such deal in the marijuana space.

“The game has changed again,” said Linton. “This gives us a global platform with all key markets and still a lot of cash in the bank to do a lot more.”

He added the deal’s structure has been vetted by U.S. and Canadian regulators and stock exchanges where “it would not step on any lines that would cause them to enforce anything.”

To Read The Rest Of This Article By David George-Cosh on BNN Bloomberg

Published: April 18, 2019

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