Acreage Holdings and Canopy Growth Corporation have announced that Acreage has obtained a final order from the Supreme Court of British Columbia approving the previously announced arrangement under section 288 of the Business Corporations Act (British Columbia) with Canopy Growth.
According to the companies, following the Arrangement, the Articles of Acreage will be amended to provide Canopy Growth with the option to acquire all of the issued and outstanding shares in the capital of Acreage, with a requirement to do so upon a change in federal laws in the United States to permit the general cultivation, distribution and possession of marijuana (as defined in the relevant legislation) or to remove the regulation of such activities from the federal laws of the United States (the “Triggering Event”), subject to the satisfaction of the conditions set out in the arrangement agreement entered into between Acreage and Canopy Growth on April 18, 2019, as amended on May 15, 2019. Canopy Growth is permitted to waive the Triggering Event and intends to do so as soon as the policies of the New York Stock Exchange and/or the Toronto Stock Exchange permit completion of the acquisition, provided that completion would not violate any third-party agreements, including those entered into by Canopy Growth with Constellation Brands, Inc.
Acreage and Canopy Growth anticipate implementing the Arrangement on or about June 27, 2019. Holders of Acreage Shares and certain securities convertible or exchangeable into Class A subordinate voting shares of Acreage as of the close of business on June 26, 2019, the business day immediately preceding the Initial Effective Date (the “Record Date”), will be entitled to receive their pro rata portion (on an as converted to Subordinate Voting Share basis) of US$300,000,000 (the “Option Premium”) being paid by Canopy Growth to such persons as consideration for granting the Canopy Growth Call Option. It is expected that the Option Premium will be distributed to such holders of record on or before the third business day following the Initial Effective Date. Pursuant to the payment of the Option Premium, each holder of Acreage Shares and certain other eligible holders of securities exchangeable for Acreage Shares will receive approximately US$2.63 per Subordinate Voting Share (on an as converted to Subordinate Voting Share basis), with the final amount to be received by each holder determined based on the number of Subordinate Voting Shares into which all of the eligible securities would be converted at the close of business on the Record Date.
As previously announced, each of Acreage and Canopy Growth received all necessary shareholder approvals in connection with the Arrangement at their respective special shareholder meetings held on June 19, 2019.
Following completion of the Arrangement and upon the occurrence or waiver of the Triggering Event, Canopy Growth will exercise the Canopy Growth Call Option and, subject to the satisfaction or waiver of the conditions to closing set out in the Arrangement Agreement, acquire (the “Acquisition”) each of the Subordinate Voting Shares (following the automatic conversion of the Class B proportionate voting shares and Class C multiple voting shares of Acreage into Subordinate Voting Shares) in exchange for the payment of 0.5818 of a common share of Canopy Growth (each whole common share, a “Canopy Growth Share”) per Subordinate Voting Share (subject to adjustment in accordance with the terms of the Arrangement).
The Companies believe that the Acquisition will deliver significant benefits that will help accelerate the growth of Acreage across the United States powered by the expertise of the world’s leading cannabis company. In turn, Canopy Growth shareholders will benefit from a national turnkey platform in the United States.