Constellation Brands Ready to Smoke the Competition as it Closes on $4 Billion Cannabis Investment
On August 15, 2018 Constellation Brands, Inc., a beverage alcohol company with headquarters in upstate New York, announced it was making a big move into the burgeoning legal cannabis market with a major expansion in its investment in Canadian based Canopy Growth Corporation. Constellation owns beer, wine and spirits brands like SVEDKA Vodka, Casa Noble Tequila, High West Whiskey, Corona, Modelo and Robert Mondavi.
Constellation Now Owns 37% of Candian Based ‘Canopy Growth Corp.’
They’ve just announced the deal worth $4 billion US ($5 billion CAD) was approved by an overwhelming majority of Canopy Growth shareholders and has been granted all required regulatory approvals, including by the Canadian government under the Investment Canada Act.
This investment provides Canopy Growth with significant funding needed 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 investment increases Constellation Brands ownership interest in Canopy Growth to approximately 37 percent of outstanding common shares of Canopy Growth and 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.
Cash Infusion Opens Up New Medical & Recreational Cannabis Opportunities
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“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. Canopy Growth management wishes to thank Chris Schnarr and Murray Goldman for their contributions to the company. Mr. Schnarr and Mr. Goldman sat on the Board as it oversaw a transformative period for Canopy Growth from a small start-up to a global, diversified industry leader. Mr. Schnarr will continue with Canopy Growth and transition into a senior leadership role overseeing medical and therapeutic research commercialization. Subsequently, Canopy Growth management welcomes 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, to the Canopy Growth Board. Their leadership and experience will be invaluable as Canopy Growth continues to grow around the world.
Canopy Already a Leader in Canadian Cannabis Market
Founded in 2013, Canopy Growth has cemented itself as the industry leader in Canada’s legal cannabis market. Through its subsidiaries Tweed and Spectrum Cannabis, Canopy Growth has established a global presence in 11 countries which is driven by product innovation, a robust intellectual property portfolio, and clinical research programs targeting both human and animal health. In Canada, Canopy Growth has established sophisticated operations to support recreational sales by raising capital and making the strategic investments required to maintain and accelerate its market leadership position at a critical time in the company’s evolution. Substantial capital is required to fully capitalize on Canopy Growth’s market-leading position in Canada and establish similar leading positions in markets around the globe.
Canopy Growth’s future plans include pursuing various product formats in all cannabis channels. Both companies have no plans to sell cannabis products in any market unless it is permissible to do so at all applicable government levels. Canopy Growth remains committed to not entering the U.S. market in any manner that would contravene U.S. federal laws.
Constellation Brands is a leading international producer of and marketer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand, Italy and Canada. The company’s Constellation Ventures include investments in Catoctin Creek Distilling, Bardstown Bourbon Company, Nelson’s Green Brier Distillery, Real McCoy Spirits Corp. and Copper & Kings American Brandy.