Canopy Growth Corporation modifies and updates 2019 deal with Acreage Holdings for a second time

According to Canopy Growth Corporation’s CEO, David Klein, the U.S. will be the company’s key market

Canopy Growth Corporation CEO David Klein has revisited a deal to purchase a New York company if the U.S. legalizes weed.

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Back in April 2019—before COVID-19 and before cannabis stocks plunged—Canada’s most valuable licensed producer announced a $3.4-billion deal.

Under this arrangement, Canopy Growth, which is based in the eastern Ontario town of Smith Falls, would buy New York–based Acreage Holdings Inc. if a key condition were met.

The U.S. federal government would have to legalize cannabis for the agreement to be executed.

The companies amended their deal on May 23, 2019.

The $3.4-billion price turned out to be a mirage, however, because it was based on the value of a swap of securities. Acreage shareholders were to receive 0.5818 of a common share of Canopy Growth in the original deal.

On May 23, 2019, Canopy Growth Corporation shares opened at $61.15.

Today, the shares opened at a much lower price: $22.50. And a second amendment was announced.

It requires Canopy Growth to pay Acreage shareholders and certain convertible security holders US$37.5 million, or approximately US$0.30 per share.

Each Acreage subordinate voting share will now be exchanged for 0.3048 of a common share in Canopy Growth Corp. rather than 0.5818 of a common share.

The newest amendment also creates two classes of Acreage shares, “including a new floating share that provides upside opportunity for Acreage shareholders that is not tied to [a] fixed exchange ratio”, according to Canopy Growth.

“The United States is going to be a core market for Canopy Growth and this New Agreement solidifies our path forward with Acreage,” Canopy Growth CEO David Klein said in a news release. “I am excited to bring our relationship with Acreage back to centre stage in our U.S. strategy and look forward to a time when the laws in the United States permit us to finalize this transaction as we march toward bringing our exciting beverage products to the U.S.”

Charlie Smith

I'm the editor of the Georgia Straight newspaper in Vancouver, as well as a CannCentral contributor.

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