Canopy Growth Corp (TSX: WEED) (NASDAQ: CGC) is looking to acquire additional US-based cannabis assets. The company this morning announced an arrangement to acquire Wana Brands and its related entities upon US federal permissibility.
The arrangement entered outlines a scenario where Wana Wellness LLC, The Cima Group, and Mountain High Products, whom make up Wanna Brands collectively, have provided Canopy with the right to acquire a 100% interest in themselves once its viewed as permissible.
The company is reportedly the largest edibles brand in North America, whom manufactures and sells gummies in Colorado while licensing its IP to partners across the US to sell branded gummies in other states. With branded products currently in 12 states and Canada, the firm expects to have a presence on retailer shelves in a total of twenty US states by the end of next year.
In exchange for the right to acquire the three separate entities, Canopy is making a cash payment of US$297.5 million on an upfront basis to acquire what is effectively call options. Once federally permissible for the entities to be acquired, Canopy will then make payments equal to 15% of the fair market value of the entities at the time of exercise.
Additional deferred payments at the 2.5 and 5 year anniversary of the upfront payments may also be made. The payments made in connection with exercising the option as well as the deferred payments may be paid in cash or shares at Canopy’s discretion.
In terms of its overall US strategy, the acquisition is said to complement and provide additional coverage to the future exposure of Canopy in the US market when combined with its Acreage Holdings acquisition and its stake in TerrAscend Corp.
The firm did not speculate on its expected timeline to exercise its option with Wana. The company will have zero control or voting interest in Wana until such option is exercised.
Canopy Growth last traded at $16.55 on the TSX.
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As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.