CBD/Hemp

Canopy to Create U.S. Holding Company

Constellation Brands takes less active role in cannabis firm
Canopy Growth
Canopy Growth/Image

SMITH FALLS, Ontario — Canopy Growth Corp. recently announced a strategy to accelerate its entry into the U.S. cannabis industry by creating a new holding company Canopy USA LLC.

Canopy USA will hold the company’s U.S. cannabis investments, which will enable it to exercise rights to acquire cannabis businesses Acreage, Wana and Jetty.

The move will help Canopy’s brands to realize value in the near term while positioning Canopy for profitable growth and a fast start, upon U.S. federal permissibility, David Klein, CEO of Canopy Growth, said.

“As the growth of the U.S. cannabis market continues rapidly at the state level, this strategy enables us to take control of our own destiny and capitalize on the once-in-a-generation opportunity in the largest cannabis market in the world,” Klein said. “We expect to unleash the full power of Canopy’s scalable and ideally positioned U.S. cannabis ecosystem to unlock potential expansion opportunities.”

Strategic highlights include:

  • Fast-track entry into the world’s largest and fastest cannabis market. The United States is projected to be a more-than $50 billion market opportunity, Canopy said. Through these “stepping stone” transactions, Canopy will be able to capitalize on the benefits and complete ownership and control of its U.S. THC (tetrahydrocannabinol) portfolio of assets upon federal permissibility.
  • Establishes industry-leading, premium focused powerhouse. Canopy USA will leverage the best of each of its brand’s offerings to accelerate growth and market expansion as key states across the country allow recreational cannabis use.
  • Financial benefit via revenue and cost synergies within Canopy USA and Canopy. The consolidation of U.S. cannabis assets is expected to generate revenue and cost synergies by leveraging the brands, routes to market and operations of the full U.S. cannabis ecosystem, the company said.

Canopy USA will have interests in New York-based Acreage Holdings Inc., a vertically integrated, multi-state cannabis operator known for its brand The Botanist; Boulder, Colo.-based Wana, a cannabis edibles brand in North America that’s vertically integrated in Colorado; and Jetty, an Oakland, Calif.-based producer of high-quality cannabis extracts and a pioneer of clean vape technology.

Canopy Growth, Smith Falls, Ontario, is a diversified cannabis and cannabinoid-based consumer product company. It offers product varieties in dried flower, oil, softgel capsule, infused beverage, edible and topical formats, as well as vaporizer devices.

Constellation Brands’ Involvement

Constellation Brands announced it was taking a less active role in Canopy Growth following its announcement to consolidate all U.S. cannabis assets into Canopy USA.

Constellation Brands, a Chicago-based beer company, owns about a 39% share of Canopy Growth. Constellation intends to transition existing common shares ownership interest in Canopy Growth into new exchangeable shares, protecting its shareholder value while retaining an interest in Canopy Growth through non-voting and non-participating shares, the company said.

“We believe that the conversion of our ownership interest will maintain Constellation’s ability to realize the potential upside of our investment in Canopy,” said Bill Newlands, Constellation’s president and CEO. “At the same time, this transaction and the surrender of our warrants are expected to eliminate the impact to our equity in earnings, mitigate risk to our organization and further reinforce our intent to not deploy additional investment in Canopy aligned with Constellation’s previously stated capital allocation priorities.”

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