Canopy Growth Corporation (NYSE:CGC) has entered into a definitive agreement with Acreage Holdings Inc. (OTCMKTS:ACRGF) which grants Canopy Growth rights of acquisition of 100% of the Acreage shares once it becomes federally legal to sell and produce cannabis in the US. The agreement is however subject to requisite approval of the Canopy Growth and Acreage shareholders and the approval of British Columbia’s Supreme Court.

Acreage to receive $300 million from the transaction

Following approval under the terms of the agreement, Acreage expects to receive an immediate payment of about $300 million or around $2.55 per subordinate voting share of Acreage based on the current outstanding voting shares as well as the conversion of certain securities. Equally on top of the exercising of the right of subordinate shares acreage will also receive 0.5818 of canopy shares for each share held at the time of concluding the transaction. Once the transaction is finalized the total consideration payable will be $3.4 billion which represent 41.7% over Acreage’s 30-day weighted average price on the Canadian Stock Exchange.

The two companies intend to execute a licensing agreement that will grant Acreage access to the brands of Canopy such as Tokyo smoke as well as other intellectual property rights.

Transaction to enable the companies to expand their footprint

Canopy Growth CEO and Chairman, Bruce Linton stated that they announced the complex transaction with a simple aim. The acquisition of Acreage is a way of entering the US market immediately the federal laws permits trading in cannabis products. He added that the combination with Acreage’s assets, licenses, and management team with Canopy’s brands is a great opportunity that will create value addition to the companies’ shareholders.

Acreage Holding CEO, Kevin Murphy said that transaction will help the company accomplish its objectives as well as delivering value to shareholders. Access to Canopy’s resources will enable Acreage to innovate, produces as well as distribute cannabis brands in the US and also expand the company’s footprint.