Canada's largest cannabis company pens historic $5 billion deal

16 August, 2018, 16:41 | Author: Brooke Harris
  • Canopy Growth reports quarterly earnings in-line with analyst expectations; net loss of C$90.9mln

Constellation Brands, which also owns the Ballast Point brewing company and Svedka vodka, said the deal would "position Canopy Growth as the global leader in cannabis production, branding, intellectual property and retailing".

Constellation's stock, however, fell almost 6% after announcing the investment.

Earlier on Tuesday, shares of Canopy Growth dipped after news that the government of Ontario announced it would allow recreational sales in privately-run pot retailers starting by April 1, months later than expected.

Canopy will keep its position on the Canadian stock exchange and the group's existing management team will remain in place.

"With our unparalleled success in Canada and Europe, Spectrum Cannabis' expanding global operational footprint now covering 11 countries, our active regulatory and global market development efforts, as well as approvals to proceed with the first of many planned clinical trials of cannabis-based medical therapies for both humans and animals, our leadership position in worldwide medical cannabis markets continues to strengthen", said chairman and co-CEO Bruce Linton in a statement.

Earlier this month, Molson Coors Canada entered into a joint venture with the Hydropothecary Corp.to develop non-alcoholic cannabis-infused products.

Canopy, based in Smiths Falls, Ontario, has specialized in the medical product and doesn't now have operations south of the border.

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Wednesday's gains, if materialized when markets open, could easily take Canopy's stock price past Wall Street's $30 target, as high as $37.

Global consumer spending on cannabis will hit US$32 billion by 2022, triple current levels, according to a report this week by USA research firms Arcview Market Research and BDS Analytics. "There will be nothing federally illegal in what we do", he said. But in the coming years, Canopy's competition will be the likes of "big pharma", and "packaged beverage", rather than Canadian cannabis companies, Linton told analysts on a conference call Wednesday.

Hold onto your hats everyone, an absolutely epic Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) fueled cannabis sector upswing is expected to kick-off in the next 60 minutes.

Constellation said it did not have a plan for such a product yet. Canopy's share price has nearly tripled.

Canopy, Canada's largest marijuana company by market capitalization, is also granting Constellation warrants, which, if fully exercised, will lift its interest above 50 per cent and inject another $4.5-billion into the Smiths Falls, Ont. -based producer.

Constellation expects the investment in Canopy to add to earnings in 2021.

"Constellation's concentration of global cannabis activities exclusively through Canopy, coupled with the investment and its expert capabilities in brand-building, marketing, consumer insights and M&A, will be a huge benefit as we look to expand our portfolio in Canada, the United States and emerging cannabis markets around the globe".

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