By Michael Dabaie
Canopy Growth Corp. shares were up Thursday afternoon after the company said it plans to acquire cannabis-edibles brand Wana Brands in a deal which includes an upfront payment of nearly $300 million.
Cannabis and cannabinoid-based consumer-product company Canopy said it is in agreements with Mountain High Products LLC, Wana Wellness LLC and The Cima Group LLC giving Canopy Growth the right, upon federal permissibility of THC in the U.S., to acquire 100% of the outstanding membership interests of Wana.
U.S.-listed shares were up 5%, to $13.96, and shares in Toronto rose 4%, to 17.25 Canadian dollars.
The deal is structured as three separate option agreements for a call option to acquire in each Wana entity. Canopy Growth said it would make an upfront cash payment of $297.5 million.
Wana manufactures and sells gummies in Colorado. The company also licenses its intellectual property to partners who manufacture, distribute, and sell Wana-branded gummies across the U.S., including California, Arizona, Illinois, Michigan, and Florida. Canopy said Wana has a total footprint of 12 U.S. states currently, and across Canada.
Wana expects to have license agreements in place in more than 20 U.S. states, including in future adult-use markets in New York and New Jersey, prior to the end of calendar 2022, Canopy said.
Canopy said the deal increases its exposure to the U.S. cannabis market upon federal permissibility. The company said this expands on the coverage provided by its existing right to acquire Acreage Holdings Inc., a U.S. multi-state operator, and conditional ownership interest in U.S. multi-state operator TerrAscend Corp.
"We see the acquisition as further positioning Canopy for its US THC strategy upon federal permissibility and also take note of the fact Canopy chose to not utilize [Acreage] as an acquirer (we note ACRG has to 'sign off' on Canopy acquisitions), which we believe highlights the company's shift to focus on brands outside of MSOs to position itself within the US," Alliance Global Partners said in an analyst note.
This would allow Wana to continue to enter into new states via licensing agreements and not be limited to states where the multi-state operator has a footprint, Alliance Global said in its note.
Alliance said it sees an opportunity for Wana to move licensing deals over to Acreage or TerrAscend over time.
Canopy's agreements for Wana follow the company in June completing its deal to acquire cannabis company Supreme and a spate of mergers involving its peers.
Write to Michael Dabaie at [email protected]