Licensed Canadian medical cannabis producers are set to move significantly higher following Canopy Growth’s (CGC.TO) (TWMJF) acquisition of Mettrum Health (MT.V) (MQTRF).
We continue to be more bullish on the Canadian cannabis industry when compared to the United States cannabis industry because in Canada, medical cannabis is legal at the federal level.
Canada is poised to become the first G8 country to legalize recreational cannabis when it announces this expected change in the spring of 2017. This is a significant development and it has created a great opportunity for companies as well as investors.
Favorable Deal for Mettrum Shareholders
Under the terms of the agreement Mettrum shareholders will receive 0.7132 common shares of Canopy Growth for each common share of Mettrum, representing consideration of C$8.42 per Mettrum common share based on the closing price of CGC.TO on November 30th.
The total transaction is valued at approximately 430 million CAD and it will be satisfied by the issuance of common shares in Canopy Growth. Once the agreement is completed, existing Canopy Growth and Mettrum shareholders are expected to own approximately 77.7% and 22.3%, respectively, of the pro forma company.
Acquisition to Benefit All Canadian Licensed Producers
Over the last year, we have stated several times that we expect to see consolidation within the licensed medical cannabis producer sub-sector.
We think today’s announcement is just the start the start of a consolidation cycle and the market seems to agree as all Canadian licensed producers move higher.
We would be buyers of the following Canadian licensed producers
- OrganiGram (OGI.V) (OGRMF)
- Aphria (APH.V) (APHQF)
- Aurora (ACB.V) (ACBFF)
- Canopy Growth (CGC.TO) (TWMJF)