$3.4 billion deal to buy Acreage gives Canopy gateway to massive American cannabis market

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But it’s dependant on marijuana being legalized in America

The US$3.4-billion deal struck by Canadian pot producer Canopy Growth Corp. for an American cannabis company could inspire some copycats, even if it first requires that the production and sale of cannabis becomes federally legal in the United States.

The deal highlights the extent to which Canadian cannabis companies covet the much larger American market, and how imaginative they’ve become in positioning themselves for the eventual loosening of U.S. cannabis laws. “Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” Linton said.Acreage, in addition to its presence in 20 states , is also known for having former Canadian Prime Minister Brian Mulroney and former Speaker of the U.S. House of Representatives John Boehner on its board of directors.

Eric Foster, a partner at law firm Dentons, said the deal could be a “game-changer” for the industry, provided it gets the OK from regulators. There have been other transactions structured with a similar “triggering event,” but not on this size or scale, he said. Murphy said in a phone interview that passage of that legislation could even happen within the next 12 months.

Once approvals from the Supreme Court of British Columbia and shareholders are received, Canopy would pay Acreage shareholders US$300 million in cash. If the U.S. federal government legalizes cannabis, Acreage shares would be automatically exchanged for Canopy shares, at a ratio of one-to-0.5818.

 

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