Canopy Growth’s Acquisition Of Supreme Has Gone Definitive……….Now What

A few months ago, Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) announced a definitive agreement to acquire 100% of The Supreme Cannabis Company, Inc. (TSX: FIRE) (OTCQX: SPRWF) in a transaction that is valued at approx. $435 million on a fully-diluted basis.

Earlier this week, Supreme reported to have been granted the final court order from the Ontario Superior Court of Justice for the acquisition and this represents an important advancement. The transaction is expected to significantly improve Canopy Growth’s position in the Canadian recreational market due to the strong consumer demand for Supreme’s 7ACRES brand. 

Supreme Cannabis also owns two additional cannabis brands, Blissco and Truverra, that are expected to substantially enhance the combined company’s leverage to Canada’s recreational and medical market.

One of the reasons we are favorable on the acquisition is related to the amount of potential synergies that can be identified. The transaction will add a low-cost and scalable cultivation facility to Canopy Growth’s production capabilities. The asset is Supreme Cannabis’ hybrid-greenhouse cultivation facility which has a track record of consistently producing premium cannabis flower.

Canopy Growth’s management team expects the acquisition to provide approx. $30 million of potential cost synergies. The synergies are expected to come from cost of goods sold, general and administrative expenses, as the company optimizes and integrates Supreme Cannabis’s operations and shared services.

We believe the combined company is better positioned to capitalize on the global cannabis opportunity and will monitor how the management team is able to grow the business once the deal is closed. When you combine Canopy Growth’s strong balance sheet (approx. $2.5 billion of cash) with Supreme Cannabis’ superior genetics and top-tier cultivation methods, we believe that it creates an operator that is well positioned to capitalize on the global cannabis opportunity.

If you are interested in learning more about the impact that Supreme Cannabis can have on Canopy Growth, please send an email to support@technical420.com with the subject “Canopy Growth’s Acquisition of Supreme Cannabis” to be added to our distribution list.

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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