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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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