Canopy Growth Corporation (WEED.TO) (CGC) has been involved with several of the most significant transactions in the history of the cannabis industry and is considered to be a leading global cannabis operator.
From retail stores (dispensaries) to cannabis infused beverages, Canopy Growth has leverage to some of the most attractive verticals of the cannabis industry. When compared to the rest of the cannabis sector, Canopy Growth has the strongest balance sheet with approx. $2 billion of cash on hand.
During the last year, Canopy Growth has slowed down the pace of making investments and acquisitions and this is a trend to be aware of. Last year, the company announced the acquisition of leading US cannabis retailer Acreage Holdings (ACRG.CN) (ACRG.F) and this was an acquisition the market was excited about.
Fast forward to today and Canopy Growth’s transaction with Acreage has started to gain attention ahead of the first phase of the merger being triggered. The companies recently amended the agreement and Canopy Growth will need to make an up-front payment of more than $37.5 million to Acreage shareholders.
If an Acreage shareholder wants to cash in their portion of the payment, it will equate to approx. $0.30 per share. We are curious as to what the proportion of shareholders taking stock or cash will be and expect the percentage to reflect how shareholders feel about the combined company and the industry.
In the original merger agreement, Canopy Growth was supposed to make a $300 million up-front payment. While we are not surprised by the reduction in the amount of the up-front payment, we were surprised by the size of the change. One of the reasons why the drop was so much is due to the acquisition being no longer fully tied to the legalization of cannabis in the US.
When the original agreement was signed, the cannabis industry was trading near peak valuations. Since the signing of the agreement, Acreage has been slow to execute. The US cannabis retailer is no longer considered to be one of the best plays on the US cannabis market and we believe that Acreage needs to execute in order to remain viable.
If you are interested in learning more about the agreement between Canopy Growth and Acreage Holdings, please send an email to email@example.com to be added to our distribution list.