ConstellationBrand’s highly priced investment in Canadian marijuana company Canopy Growth seems to pay off. After the share price in Canopy has risen by more than 70 percent this year, Constellation has already gained about USD1.7 billion on its shares.
When Constellation announced in August last year to stack up its investment in the marijuana company from 9 percent to 38 percent in a deal worth USD4 billion, thus paying a premium of more than 50 percent of the stock price at this time, financial experts were skeptical about the deal (inside.beer, 15.8.2018).
Canopy announced today that it plans upon U.S. Federal cannabis legalization to acquire 100 percent of the shares of Acreage Holdings, one of the largest U.S. pot firms. The Transaction is valued at approximately USD3.4 billion on a fully-diluted basis, which represents a premium of 41.7% over the 30-day volume weighted average share price. In a separate agreement Acreage will be granted access to Canopy Growth's brands such as Tweed and Tokyo Smoke, along with other intellectual property.
“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,” said Acreage Holdings Chairman, CEO and President Kevin Murphy.
“Once the Right is exercised, the combined infrastructure, intellectual property, brands and organizational resources are expected to create a global cannabis powerhouse, with an anticipated leadership position in every targeted international market for legal cannabis sales, including the U.S., Canada, and select markets across Latin America, Europe and Asia-Pacific,” Canopy said in a press statement.
In a separate statement, Constellation also announced today that it plans to modify certain warrants and other rights to allow Canopy to execute the multi-billion deal. The Acreage deal, if completed, will dilute Constellation’s holding. “If Canopy exercises its right to acquire the shares of Acreage and Constellation were to exercise all of their outstanding Canopy warrants, Constellation’s ownership in Canopy is not expected to exceed 50 percent,” Constellation said today. However, a special provision in the deal allows Constellation to buy shares on the open market in order to gain full control of the world’s most valuable marijuana company.
The news on the successful development of its marijuana venture comes at times when Constellation Brands rethinks its craft beer strategy. This week it became also known that Ballast Point, Constellation's flagship craft beer brand, has to close several of its locations in California (inside.beer, 17.4.2019).