News

Constellation Brands bets on cannabis growth

20 Aug 2018

Beverage and alcohol company Constellation Brands and Canopy Growth, a diversified cannabis company, have announced what they describe as a significant expansion of their strategic partnership.

Beverage and alcohol company Constellation Brands and Canopy Growth, a diversified cannabis company, have announced what they describe as a significant expansion of their strategic partnership to position Canopy Growth as the global leader in cannabis production, branding, intellectual property and retailing.

Constellation Brands will increase its ownership interest in Canopy Growth by acquiring 104.5 million shares directly from Canopy Growth, thereby achieving approximately 38% ownership when assuming exercise of the existing Constellation warrants. Constellation Brands is acquiring the new shares at a price of C$48.60 per share, which is a 37.9% premium to Canopy’s 5-day volume weighted average price of the common shares on the Toronto Stock Exchange (“VWAP”), and a 51.2% premium to the closing price on August 14, 2018. Constellation will also receive additional warrants of Canopy that, if exercised, would provide for at least an additional $4.5 billion CAD to Canopy Growth.

As a result of the new shares Constellation is acquiring, Canopy Growth will immediately upon closing have proceeds of approximately $5 billion CAD ($4 billion USD) to bolster its leadership position in the global cannabis industry. This investment, the largest to date in the cannabis space, will provide funds which Canopy Growth will deploy to strategically build and/or acquire key assets needed to establish global scale in the nearly 30 countries pursuing a federally permissible medical cannabis program, while also rapidly laying the global foundation needed for new recreational cannabis markets. Canopy Growth’s Canadian platform does not require additional cannabis cultivation assets, and management views other jurisdictions, including the United States, as strategic priorities requiring significant capital.

“Through this investment, we are selecting Canopy Growth as our exclusive global cannabis partner,” said Rob Sands, Chief Executive Officer, Constellation Brands. “Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space. We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space.”

Canopy Growth will, says Constellation, benefit from its deep understanding of consumer trends and shifting preferences, and proven ability to translate those insights into distinct brand positionings that build strong connections with consumers and foster brand loyalty. Constellation’s disciplined approach and capabilities in areas such as mergers and acquisitions, finance, large-scale production, marketing and sales as a leading Fortune 500 company, combined with Canopy’s entrepreneurial approach and best-in-class knowledge and expertise within the emerging cannabis sector create a powerful combination that will ensure Canopy Growth is set up for sustainable, long-term success as the company and sector evolve.

Founded in 2013, Canopy Growth has established a presence in 11 countries. In Canada, Canopy Growth has established operations to support recreational sales by raising capital and making the strategic investments required to maintain and accelerate its position at a critical time in the company’s evolution. Substantial capital is required to fully capitalize on Canopy Growth’s position in Canada and establish similar positions in markets around the globe.

“Our business can now make the strategic investments required to accelerate our market position globally,” said Bruce Linton, Chairman and Co-CEO, Canopy Growth. “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. We view this investment in our business as an endorsement of our execution since forming our initial strategic relationship in October 2017.”

Canopy Growth’s future plans include pursuing various product formats in all cannabis channels. Both companies have no plans to sell cannabis products in any market unless it is permissible to do so at all applicable government levels. Canopy Growth says it remains committed to not entering the U.S. market in any manner that would contravene U.S. federal laws.