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Acreage Holdings Inc (OTCMKTS:ACRGF) Gets Significant Advantage In The US Market On Acquisition Plans By Canopy Growth Corp (NYSE:CGC)

Canopy Growth Corp (NYSE:CGC)’s planned takeover provides an immediate and significant advantage in the competitive market of the US to Acreage Holdings Inc (OTCMKTS:ACRGF). As per the previously agreed acquisition plan, both the firms have submitted the management circulars under the approved arrangement by the court under the Business Corporations Act.

The transaction is subject to the waiver of changes in the federal law of the US to allow distribution, cultivation, and possession of marijuana. The deal is also subject to the approval of the Toronto Stock Exchange and New York Stock Exchange. It is also subject to the approval of the shareholders in a meeting scheduled on June 19, 2019.

Cash consideration

Following the deal, the shareholders of Acreage will receive upfront cash for each share up to $2.63. Each share of Acreage will be converted to 0.5818 share of Canopy. It is at a premium of 40% to the subordinate voting shares 30-day volume weighted average trading price on April 17, 2019, on the CSE. The shareholders of Acreage will also benefit from its ability to meet the set growth with reduced capital. The shareholders of Canopy will benefit from turnkey and accelerated access to the cannabis market in the US. This, together with the expertise of Canopy, will propel the growth.

Board approval

The board of directors of both the companies has unanimously supported the deal. Management circulars of both Canopy and Acreage outline the benefits and risks that arise from the transaction to the shareholders. The shareholders will receive the circulars by mail.

If the transaction is implemented, the combined entity will benefit from the improved product line, distribution networks, and complementary assets. Acreage will get access to the trademarks, operational expertise, and intellectual property of Canopy.

Canopy Stock surges

The stock of Canopy has surged on May 23, 2019, following the news of the acquisition of a This Works, skin Care Company based in the UK. The deal is valued at $54 million in cash. The product line of This Works comprises sleep aid products and skin care products. This is a crucial deal for Canopy since it banks on CBD and hemp strategy for integrated manufacturer/ marketing platform.

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Marijuana

Constellation Brands (NYSE:STZ) Signs Agreement With Canopy Growth Corporation (NYSE:CGC) For Modification Of Warrants And Rights

Constellation Brands (NYSE:STZ) has announced plans to enter into an agreement with Canopy Growth Corporation (NYSE:CGC) for the modification of certain rights and warrants. The modifications are a result of Canopy’s plans of acquiring Acreage Holdings Inc. (OTCMKTS:ACRGF) following federal legalization of cannabis.

Constellation to waive its veto rights

Canopy has already announced the option of acquiring acreage shares upon federal cannabis legalization in the US. The proposed acquisition, as well as the modification of Constellation warrants, is subject to the approval of shareholders. Following the plans, Constellation has agreed that it will relinquish its veto rights to the transaction under the proposed modifications to warrants and other rights.

Besides the 18.9 million warrants related to the 2017 Canopy Investment, the company currently holds 139.7 million warrants that will become exercisable for a period of between five and eight years upon shareholder approval. This will include the 88.5 million Tranche A warrants expected to be exercisable at C$50.40 per share and 51.2 million of Tranche B warrants of which 75% or 38.4 million will be exercisable at C$76.68 per share while the remaining 25% will become part of Tranche C warrants exercisable at the five-day weighted average price of Canopy’s common stock on the Toronto stock exchange.

However, even if Canopy were to exercise its right to acquire Acreage whereas constellation was to exercise its outstanding Canopy warrants its ownership of Canopy cannot exceed 50%.

Canopy to reacquire 25% of warrants issued to Acreage

Nonetheless, if Constellation chose to fully exercise Tranche A warrants, Canopy will reacquire the lesser of the 25% of its issued warrants to Acreage or commit dollar amount equivalent to the 25% implied enterprise value of Acreage within two years from the date Constellation exercises its warrant. Prior to termination or exercising of its warrants, Constellation will have the option of purchasing approximately 20 million of Canopy shares whereby for each share purchased the Tranche B warrant will be reduced by one.

Constellation will maintain its current representation level on Canopy’s Board.

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Marijuana

Canopy Growth Corporation (NYSE:CGC) Signs Definitive Agreement To Acquire US Cannabis Operator Acreage Holdings Inc. (OTCMKTS:ACRGF)

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.

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