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Constellation Brands spending $5 billion to increase stake in Canopy Growth

Last Updated Aug 15, 2018 at 6:37 am PDT

SMITH FALLS, Ont. – Constellation Brands has signed a deal to invest $5 billion in Canopy Growth Corp. to increase its stake in the marijuana company to 38 per cent and make it its exclusive global cannabis partner.

Under the agreement, Constellation, a global producer of beer, wine and spirits, will acquire 104.5 million Canopy shares at a price of $48.60 per share.

Canopy shares closed at $32.15 on the Toronto Stock Exchange on Tuesday.

“Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space,” Constellation Brands chief executive Rob Sands said in a statement.

“We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space.”

The investment follows a deal last year that saw Constellation acquire a nearly 10 per cent stake in Canopy for $245 million.

The agreement Wednesday will see Constellation nominate four directors to Canopy Growth’s seven-member board of directors.

Constellation is also receiving 139.7 million new warrants, which are exercisable over the next three years. If Constellation exercises all of its existing and new warrants, its ownership in Canopy would exceed 50 per cent.

“Our business can now make the strategic investments required to accelerate our market position globally,” Canopy chairman and co-chief executive Bruce Linton said in a statement.

“Constellation’s concentration of global cannabis activities exclusively through Canopy, coupled with the investment and its expert capabilities in brand-building, marketing, consumer insights and M&A will be a huge benefit as we look to expand our portfolio in Canada, the United States and emerging cannabis markets around the globe.”

The investment, which is expected to close by the end of October, is subject to customary closing conditions, including Canopy shareholder approval and regulatory approvals.

The investment deal came as Canopy reported a loss of $80.3 million or 40 cents per share for the quarter ended June 30 as it continued to ramp up its operations ahead of the legalization of recreational marijuana in Canada later this year.

The loss compared with a loss of nearly $9.1 million or six cents per share a year ago.

Revenue for the three-month period totalled $25.9 million, up from nearly $15.9 million in the same quarter a year earlier.

Companies in this story: (TSX:WEED)