By Constellation Brands, Kristine Owram and Jen Skerritt
C $ 5 billion ($ 3.8 billion) is spent to raise the interest in Canadian cannabis grower Canopy Growth Corp. to increase. Betting legalization of the drug will still achieve traction in the US and the rest of the world.
Constellation, the brewer of Corona beer, increases its share in Canopy to 38 percent in what the companies described were the largest investment in the nascent marijuana industry to date, according to a Wednesday statement. The agreement, which could ultimately provide the check in liquor stores based in Victor, New York, follows a first purchase of about 10 percent of the past year. Canopy shares rose 33 percent to C $ 42.95 at 9:53 AM, giving it a market value of C $ 9.36 billion. Constellation fell by 7.2 percent to $ 205.79 in New York.
"This is rocket fuel," Chief Executive Officer of Canopy, Bruce Linton, said about the company's investment call on Wednesday. "We will be much more globally."
Alcoholic beverage makers want to keep the growing use of cannabis in the world in check if their traditional business slows down. Molson Coors Brewing Co. has started a joint venture with Hydropothecary Corp. to develop non-alcoholic, cannabis-infused drinks for the Canadian market. The traditional brewing label from Lagunitas has launched a brand specializing in non-alcoholic drinks with THC, the active ingredient in marijuana.
Canada will be the first G-7 country to legalize pot for recreational use on Oct. 17 States from California to Colorado have already allowed the drug to grow legally and medical cannabis growing worldwide.
Sales of legal products in Canada are expected to reach $ 4.9 billion by 2022 and consumer spending worldwide will reach $ 32 billion, three current levels, according to a report by US cannabis research agencies Arcview Market Research and BDS Analytics this week . The American legal cannabis industry gains economic and political strength, employs more than 200,000 people, while the market for listed companies in Canada has exploded. The BI Canada Cannabis Competitive Peers Index has 74 companies with a market value of C $ 61 billion.
Canopy, located in Smiths Falls, Ontario, currently has no activities south of the border, where marijuana is federally banned. If you enter the United States, this may lead to problems with listing on the Toronto Stock Exchange because the stock exchange has said it may be abolishing marijuana companies that violate United States federal law. Canopy is also listed on the New York Stock Exchange.
However, both companies said they do not intend to sell cannabis products on any market, unless permitted at all applicable government levels.
"Canopy Growth remains committed to not entering the US market in any way that would violate US federal laws," the company said in a statement.
Linton added, however, that the federal in the US can be legal "rather than people think" and that canopy does everything that is entirely federally lawful to prepare.
Canopy, which is present in 11 markets around the world, said it would make international growth a priority. The company does not set hard guidelines on how it intends to use the inflow of capital, although the target acquisition list globally exceeds $ 1 billion, Linton said during the call. That list is likely to grow as new markets open and the company can now make strategic investments with cash instead of dilapidating & # 39; shares, he said.
Constellation Brands buys new shares under this deal at C $ 48.60 per share, a 38 percent premium for Canopy's five-day volume-weighted average on the Toronto Stock Exchange, and a 51.2 percent premium for the Tuesday in the neighborhood. Constellation also receives 139.7 million warrants that can be exercised over the next three years at a price of C $ 50.40. When Constellation exercises all existing and new warrants, it can increase its stake to more than 50 percent.
Constellation can call four of the seven directors of Canopy Growth. Canopy will be further guided by the existing management.
"Over the past year, we have gained a better understanding of the cannabis market, the tremendous growth potential it offers and the market-leading capabilities of Canopy in this space," Constellation CEO Rob Sands said in the statement.