The biggest deal in cannabis history: Constellation $4bn investment in Canopy closes

Corona owner Constellation Brands’ C$5bn (US $4bn) investment in Canopy Growth has been approved by Canopy shareholders and been granted all required regulatory approvals.

Those approvals include the green light from the Canadian government under the Investment Canada Act.

The investment, initially announced in August, provides Canopy Growth with significant funding which it says it will use to ‘build scale in the more than 30 countries currently pursuing federally permissible medical cannabis programs, while establishing the foundation needed to supply new recreational adult-use markets as cannabis becomes legal in markets around the world’.

“The global cannabis market presents a significant growth opportunity and Canopy Growth is well-positioned to establish a strong leadership position in this fast-evolving category.”

Rob Sands, Constellation Brands

“We’re excited to expand our strategic partnership with Canopy Growth and to begin helping them build the global scale needed to win long-term,” said Rob Sands, chief executive officer, Constellation Brands.

“The global cannabis market presents a significant growth opportunity and Canopy Growth is well-positioned to establish a strong leadership position in this fast-evolving category.”

With this investment, Constellation Brands increases its ownership interest in Canopy Growth to approximately 37% of outstanding common shares of the company.

Constellation has appointed two members of its executive team, as well as two independent directors, to the Board of Directors of Canopy Growth.

Constellation estimates the interest expense associated with this transaction to approximate $55 million before tax with an approximate $0.25 impact on fiscal 2019 comparable basis EPS results. Constellation also continues to evaluate the potential equity in earnings impact from the Canopy Growth investment and related items.

“Now this capital is Canopy’s to deploy, we’re going to quickly get to work increasing our lead by adding strategic assets around the world.”

Bruce Linton, Canopy Growth

“Our cash position opens up a world of opportunity for us,” said Bruce Linton, chairman and co-chief executive officer, Canopy Growth.  “Relative to our valuation, we have never been in a better position to create shareholder value.

“This investment was a landmark moment for the entire sector when it was announced. Now that the capital is Canopy’s to deploy, we’re going to quickly get to work increasing our lead by adding strategic assets around the world.”

The transaction includes a restructuring of Canopy Growth’s Board of Directors, with Chris Schnarr and Murray Goldman stepping down.

Schnarr will continue with Canopy Growth and transition into a senior leadership role overseeing medical and therapeutic research commercialization.

The following join the Canopy board: Constellation’s President and Chief Operating Officer Bill Newlands and Executive Vice President and Chief Financial Officer David Klein, as well as current Constellation Board Members Judy Schmeling, former HSNi LLC chief operating officer, and Robert Hanson, chief executive officer of John Hardy Global Limited.

Constellation is the No. 3 beer company in the U.S. with brands such as Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico.

Canopy Growth has operations in 12 countries across five continents.Cannabis Business Worldwide

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