Canopy Growth Corp (TSX: WEED) (NYSE: CGC) and Acreage Holdings (CSE: ACRG) jointly announced this morning that the amended arrangement, as previously announced, has been implemented by Acreage. The changes effectively modified Acreage’s share structure to enable a more defined acquisition arrangement with Canopy, should federal legalization of cannabis occur in the US over the coming years.
The arrangement, to put it simply, appears to be a headache. The arrangement created three new classes of shares for Acreage, two of which are intended to trade publicly on the Canadian Securities Exchange effective as of this morning. The following new classes have been implemented:
- Class D shares, referred to as “Floating Shares,” which now trade on the CSE under symbol “ACRG.B.U”. These are considered subordinate voting shares.
- Class E shares, referred to as “Fixed Shares,” which now trade on the CSE under symbol “ACRG.A.U”. These are considered subordinate voting shares.
- Class F shares, referred to as “Fixed Multiple Shares.” These shares do not trade on a public exchange. These are considered multiple voting shares.
Under the amended arrangement plan, the company has seen its currently outstanding shares exchanged for these new share classes. Here’s a summary of how this new shares are being doled out:
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- For each Class A (previously referred to as “Subordinate Voting Shares”) share held, shareholders will be issued 0.3 of a Class D share, and 0.7 of a Class E share.
- For each Class B (previously referred to as “Proportionate Voting Shares”) share held, shareholders will be issued 12 Class D shares, and 28 Class E shares.
- For each Class C (previously referred to as “Multiple Voting Shares”) share held, shareholders will be issued 0.3 of a Class D share, and 0.7 of a Class F share.
As a result of these new shares being exchanged for old shares, Class A shares will no longer trade on the Canadian Securities Exchange.
The amended agreement and subsequent share structure changes were required as a result of Canopy no longer wishing to be liable for acquiring the entirety of Acreage Holdings upon the federal legalization of cannabis within the US. Under the amended agreement, Canopy will now only be required to acquire all of the outstanding Class E shares upon a federal legalization event.
These shares, upon the legalization event, will be acquired by Canopy at an exchange rate of 0.3048 common shares of Canopy Growth for each Class E share of Acreage held. Immediately before these shares are acquired, the Class F shares will be exchanged for Class E shares at the stated exchange ratio.
Class D shares will then act as an option for Canopy Growth, should Canopy desire to acquire a 100% interest in Acreage Holdings. The acquisition price of these shares will be based on the 30 day volume weighted average price of the shares, subject to floor pricing of US$6.41 per share.
Finally, holders of Acreage Holdings as of the close of markets on September 22, 2020, are entitled to receive US$0.30 per share, which is pro rated from a US$37,500,024 upfront payment made in connection with the amended agreement. This payment (effectively a dividend payable by Canopy) will be made in an estimated three days.
A US$50 million advance was also made to Universal Hemp, a subsidiary of Acreage, for use in its hemp operations and structured as a debenture. An additional US$50 million debenture may be issued subject to certain terms. The debentures bear interest at a rate of 6.1% per annum and contain a maturity of 10 years.
Canopy Growth last traded at $15.32 on the NYSE.
Information for this briefing was found via Sedar, Canopy Growth Corp and Acreage Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
