On April 18, 2019, Canopy Growth Corporation and Acreage Holdings, Inc. entered into a definitive arrangement agreement that grants Canopy Growth the right to acquire 100 percent of the shares of Acreage (the “Right”), with a requirement to do so at such time as cannabis production and sale becomes federally legal in the United States, subject to obtaining the requisite prior approval of the shareholders of each of Acreage and Canopy Growth, respectively, as well as the approval of the Supreme Court of British Columbia.
Following these approvals, Acreage Holders will receive an immediate aggregate total payment of US$300 million or approximately US$2.55 per Acreage Subordinate Voting Share. In addition, upon the exercise of the Right, holders of subordinate voting shares of Acreage will receive 0.5818 of a common share of Canopy Growth for each Acreage Subordinate Voting Share held at the time of closing of the transaction. Upon exercise of the Right, the total consideration payable pursuant to the transaction is valued at approximately US$3.4 billion on a fully-diluted basis, represents a premium of 41.7% over the 30-day volume weighted average price of the Acreage Subordinate Voting Shares on the Canadian Securities Exchange ending April 16, 2019.
Completion of the transaction is conditional on certain amendments to the existing warrants held by a subsidiary of Constellation Brands, Inc. Canopy Growth and Constellation Brands amended their investor rights agreement and agreed to extend the expiry date and fix the variable pricing for certain warrants held by Constellation Brands at a price per share of C$76.68.
The companies will also execute a licensing agreement granting Acreage access to Canopy Growth’s award-winning line-up of brands such as Tweed and Tokyo Smoke, along with other intellectual property. Once the Right is exercised, Acreage will become part of the leading global cannabis company with access to markets beyond the U.S.
Cassels Brock is acting for Canopy Growth with a deal team that includes Jonathan Sherman, Jamie Litchen, Andrea FitzGerald, John Vettese, Stefanie Sebanc and Miriam El Ofir (Securities, M&A and Cannabis), James Morand (Tax), John Christian (Business), Wendy Berman (Advocacy), Alison Hayman (Intellectual Property), and Chris Hersh (Competition).