USA: Constellation Brands reduces exposure to the cannabis business

Constellation Brands is reducing its exposure to the cannabis business by converting its existing common shares ownership interest in Canopy Growth Corporation into new exchangeable shares thus focusing more on its core beer, wine and spirits business. Constellation said today, it will remain the largest shareholder in Canopy but will “not deploy additional investment in Canopy”.

In the last years, in order to take growth opportunities in the evolving cannabis market, Canopy heavily invested in the market but at the same time also increased its debt burden. Since October 2017, Constellation helped financing this growth by investing far more than USD 4 billion in Canopy in several financing rounds (, 30.10.2017,, 1.5.2020,, 29.6.2022) through its wholly owned subsidiaries Greenstar Canada Investment Limited Partnership and CBG Holdings. Today, Constellation owns 38.6% in Canopy.

However, the Canadian cannabis market is challenged by oversupply, the legalization of cannabis on a national level in the U.S. might still take years, and Canopy continues to incur losses.

For the period ended June 30, Canopy recorded a goodwill impairment charge of CAD1.7 billion (USD 1.25bn) and an overall net loss of CAD 2.1 (USD 1.54bn). This forced Constellation to equally write down its equity investment in Canopy by just under USD 1.1 billion which resulted in a hefty net loss of USD 1.1 billion in Constellation’s most recent period ended Aug. 31, versus a profit of USD 11.9 million in the prior-year period.

Against this background, Canopy Growth Corporation today announced plans to consolidate all U.S. cannabis assets into a single entity, Canopy USA, creating a U.S. holding company and exchangeable share structure designed to enable Canopy USA to trigger full ownership of U.S. cannabis investments and buy three U.S. cannabis companies Acreage Holdings, WanaGroup (consisting of Mountain High Products, Wana Wellness, and The Cima Group), and Lemurian (Jetty).

“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’s President and CEO in a press statement today. “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 aligned with Constellation’s previously stated capital allocation priorities.”

“Whether or not the U.S. moves ahead with legalization, the creation of Canopy USA “gives us a head start on any regulatory reform to come through,” said Canopy Growth CEO David Klein. On election day, Nov. 8, five more U.S. states with about 13 million of adults will vote on cannabis legalization measures.

Canopy Growth will have no direct control over Canopy USA, which will have its own board of directors in order to allow Canopy Growth to remain in compliance with U.S. cannabis laws and continue trading on the Nasdaq and the Canadian Securities Exchange.

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