VICTOR, N.Y., and SMITHS FALLS, Ontario -- Constellation Brands has significantly expanded its investment in cannabis company Canopy Growth Corp., giving the Canada-based cannabis maker a significant financial windfall to grow its business and providing the U.S.-based alcohol-beverage company significant insight into the marijuana business.
A year ago, Constellation Brands, the importer of Corona and Modelo beers, Svedka vodka and Mark West wines, among other alcohol brands, acquired a 9.9% minority stake in Canopy Growth Corp., a public company and provider of medicinal cannabis products.
Victor, N.Y.-based Constellation Brands will increase its ownership interest in Canopy Growth by acquiring 104.5 million shares directly from the Ontario-based company, giving Constellation about 38% ownership.
As a result of the new shares Constellation is acquiring, Canopy Growth will upon closing have proceeds of approximately $4 billion to bolster its position in the global cannabis industry, according to the companies.
This investment, the largest to date in the cannabis space, will provide funds that 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, the company said. Canopy Growth management said it views jurisdictions outside Canada, 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, CEO of 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.”
Consumer Considerations
Canopy Growth will benefit from Constellation’s understanding of consumer trends and shifting preferences, and its ability to translate those insights into distinct brand positioning that build strong connections with consumers and foster brand loyalty, the company said.
“Our business can now make the strategic investments required to accelerate our market position globally,” said Bruce Linton, chairman and co-CEO of 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."
As part of the proposed transaction, Constellation will nominate four directors to Canopy Growth’s seven member board of directors. Canopy Growth will remain a Canadian publicly traded company with headquarters in Smiths Falls, Ontario, and it will continue to be led by its existing management team, who will continue to manage all international cannabis operations.
As part of its investment, Constellation is receiving 139.7 million new warrants—essentially, opportunities to acquire additional stock—that are exercisable over the next three years. If Constellation were to exercise all existing and new warrants, its ownership would exceed 50%.
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 remains committed to not entering the U.S. market in any manner that would contravene U.S. federal laws, the company said.
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