Constellation Brands to acquire 9.9% of Canopy Growth for $245M

Ted Liu

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Constellation Brands (NYSE: STZ, STZ.B) has signed an agreement to acquire a minority stake in Canopy Growth Corporation (TSX: WEED), a provider of medicinal cannabis products. The investment is expected to approximate CDN $245 million representing an ownership interest of 9.9% of Canopy Growth Corporation.

Canopy Growth will issue 18,876,901 common shares at a price of $12.9783 per share based on a 5-day volume weighted average price (VWAP) as of the close of markets on October 27, 2017. An equal number of common share purchase warrants will be issued at the same price, subject to certain restrictions, expiring 30 months from the closing date. The warrants are exercisable in two equal tranches, with the first exercisable tranche date being August 1, 2018 and the second exercisable tranche date being February 1, 2019.

Canopy Growth intends to use proceeds to fund the expansion of its international growing platform and to support ongoing investments in value-add processing and new product development and research.

The transaction has been conditionally approved by the Toronto Stock Exchange and is expected to close on or about November 2, 2017.

INFOR Financial Inc. acted as financial advisor to Canopy Growth in respect of the transaction. LaBarge Weinstein LLP acted as legal counsel to Canopy Growth, and Osler, Hoskin & Harcourt LLP and Nixon Peabody LLP acted as legal counsel to Constellation.

Constellation Brands said the investment is consistent with its long-term strategy to identify, meet and stay ahead of evolving consumer trends and market dynamics, while maintaining focus on its core total beverage alcohol business. Constellation has no plans to sell any cannabis products in the U.S. or any other market unless or until it is legally permissible to do so at all government levels.

“Canopy Growth has a seasoned leadership team that understands the legal, regulatory and economic landscape for an emerging market that is predicted to become a significant consumer category in the future,” said Constellation Brands President & CEO, Rob Sands. “Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction.”

“In Constellation we have a strategic ally that will join us as we lead the global cannabis sector into the future. We have also strengthened our balance sheet to fund the ambitious expansion efforts we have planned heading into 2018 – a year that will see unprecedented growth in medical and adult-use opportunities,” said Bruce Linton, Chairman and CEO, Canopy Growth.

“We are thrilled to have the backing of such a well-established and respected organization such as Constellation Brands,” said Linton. “We look forward to working with the Constellation Brands team to access their deep knowledge and experience in growing brands as we continue to expand our business.”

photo credit: Canopy Growth Corporation