Canopy Growth to Buy Acreage Holdings, Jumps 10 Percent

263

As major cannabis companies continue to aggressively acquire other potential competitors and helpful service providers, it appears that another major multi-billion-dollar deal is in the works.

The world’s largest marijuana company, the Canadian-based Canopy Growth Corp (TSE: WEED)(NYSE: CGC) announced on Wednesday that it is close to finalizing a deal to acquire the right to purchase Acreage Holdings Inc (TSXV: ACRG.U), one of the top U.S. based cannabis companies out there.



A source familiar with the negotiations has said that the two companies were in talks for the past few weeks over a potential acquisition, siting that the deal with “98% done” and a final price was still being finalized. Acreage currently has a market cap of $921.5 million, but the source went on to say that the deal will be worth “several billion” at the minimum, according to MarketWatch.

The source in question went on to say that Canopy had been looking at potentially acquiring a number of U.S.-based operations outside of Acreage, meaning that there could be many more major-scale deals to follow in the weeks to come. Acreage is the largest vertically integrated cannabis operator in the U.S., with operations in many states and has already attracted considerable attention from Wall Street.

However, Canopy Growth would violate a number of rules with the Toronto Stock Exchange should it outright acquire Acreage. The exchange does not permit companies to own stakes in businesses that have illegal operations, with Acreage technically qualifying since cannabis is still federally illegal in the U.S. Canopy would also have to give up it’s U.S. listing on the NYSE, something which the company doesn’t want to do.

Instead, the agreement would see Canopy purchase the rights to buy Acreage if or when cannabis becomes legal in the U.S. at a set price. According to the source, the deal would give Canopy the option to buy Acreage sometime in the future rather than acquire it immediately and incur the regulatory problems that would come from an immediate purchase. This also gives Canopy the strategic flexibility to potentially turn down the offer in the future should the situation change, although this is extremely unlikely.

In response to the good news, shares of Canopy jumped over 10 percent in after hours trading on Wednesday while Acreage Holdings jumped 9.8 percent as well. This would make the two companies among the top winners in the cannabis market this week, with many stocks tumbling over the past few days for one reason or another. Neither company was willing to comment on this information.

Canopy Growth Company Profile

Canopy Growth Corp through its subsidiaries is the licensed producer of medical marijuana in Canada. The company grows, produces and sells medical marijuana. It operates diverse brands and variety supported by over half million square feet of indoor and greenhouse marijuana production. It sells medical marijuana under various brand names including Tweed, Bedrocan, and Mettrum. A majority of the revenue is derived from the sale of medical marijuana by Tweed and Bedrocan in Canada. – Warrior Trading News

NO COMMENTS

LEAVE A REPLY