Canopy Growth Corporation announced a strategy to accelerate its entry into the U.S. cannabis industry and unleash the value of its full U.S. cannabis ecosystem through the creation of a new U.S.-domiciled holding company, Canopy USA, LLC, and the execution of a deliberate and highly-structured process. Canopy USA will hold the Company’s U.S. cannabis investments, which will enable it to exercise rights to acquire Acreage, Wana, and Jetty.
“As the growth of the U.S. cannabis market continues rapidly at the state level, this strategy enables us to take control of our own destiny and capitalize on the once-in-a-generation opportunity in the largest cannabis market in the world,” said David Klein, Chief Executive Officer of Canopy Growth Corporation. “We expect to unleash the full power of Canopy’s scalable and ideally-positioned U.S. cannabis ecosystem to unlock potential expansion opportunities. This strategy and positioning are true differentiators, which we expect to enable our investors and brands to realize the value in the near term while positioning Canopy for profitable growth and a fast start upon U.S. federal permissibility.”
- Fast-tracks entry into the world’s largest and fastest-growing cannabis market: The U.S. is projected to be an over $50 billion market opportunity, and this strategy aims to unlock the ability to capture share and return on investments made to date. Through these “stepping stone” transactions, Canopy will be strategically repositioned to capitalize on the benefits of complete ownership and control of its U.S. THC portfolio of assets upon U.S. federal permissibility.
- Establishes industry-leading, premium-focused brand powerhouse: Canopy USA’s portfolio includes some of the most recognized, iconic cannabis brands in the U.S. that the Company believes are ideally positioned in the fastest-growing categories, such as edibles, vapes, and flower. Canopy USA is expected to leverage the best of each brand’s offerings to accelerate growth, and market expansion as key states across the country continue to allow recreational cannabis usage, realizing value in the near term.
- Highlights the value of Canopy’s U.S. THC investments: Canopy and Canopy USA, collectively, are expected to rank among the top cannabis companies in North America by revenue. With a protective layer in place for Canopy’s core businesses, including its Canadian and international cannabis operations, STORZ & BICKEL, BioSteel, and This Works, Canopy is expected to consolidate the financial performance of Canopy USA in accordance with U.S. GAAP, enabling Canopy to highlight the value of its U.S. THC assets to investors.
- Financial benefit via revenue and cost synergies within Canopy USA and across Canopy: The consolidation of U.S. cannabis assets is expected to generate revenue and cost synergies by leveraging the brands, routes to market, and operations of the full U.S. cannabis ecosystem.
Canopy’s U.S. cannabis ecosystem
Canopy’s U.S. cannabis ecosystem has an established presence across large-scale and rapidly developing adult-use markets. Collectively, this footprint currently spans 21 states: Arizona, Arkansas, California, Colorado, Connecticut, Florida, Illinois, Maine, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, Ohio, Oklahoma, and Oregon.
Canopy USA will have interests in the following assets, among others:
- Acreage – The shares to be acquired upon the exercise of the option to acquire approximately 70% of the total shares of Acreage Holdings, Inc. at a fixed share exchange ratio of 0.3048 of a common share of the Company, as well as an option to purchase the remaining approximately 30% on a floating basis in order to own 100% of Acreage. A leading vertically integrated multi-state cannabis operator, Acreage has its main operations in densely populated states across the Northeast, including New Jersey and New York. Through its well-known national retail brand, The Botanist, Acreage engages U.S. cannabis consumers and delivers a range of award-winning products through The Botanist brand and a portfolio of high-impact, quality brands like Superflux, as well as the Prime medical brand in Pennsylvania, and the Innocent brand in Illinois among others.
- Wana – The option to acquire 100% of the membership interests of Mountain High Products, LLC, Wana Wellness, LLC, and The Cima Group, LLC, a leading cannabis edibles brand in North America. Wana is vertically integrated in Colorado and has a rapidly growing licensing division across 13 additional states while also holding the #1 market share position in Canada. With a scalable business model, Wana has built a dominant position in the gummies category, which is one of the fastest-growing edibles segments. Backed by a robust pipeline of new consumer-focused products, Wana is entering new markets to capture consumers looking for high-quality products that deliver against desired need states.
- Jetty – The option to acquire 100% of the shares of Lemurian, Inc., a California-based producer of high-quality cannabis extracts and pioneer of clean vape technology. Leaders in solventless vapes and a Top 10 California Brand, Jetty pioneers the latest technology to create industry-leading extracts, including award-winning solventless vapes, live resin vapes, and other products. Supported by nine years of operations, Jetty represents a critical foothold in the largest THC market in the U.S. and is primed to scale its high-quality products nationally.
In addition, Canopy USA controls a conditional ownership position, assuming conversion of its exchangeable shares and the exercise of its option but excluding the exercise of its warrants, of approximately 13.7% in TerrAscend Corp., a North American cannabis operator with vertically integrated operations and a presence in Pennsylvania, New Jersey, Michigan, and California as well as licensed cultivation and processing operations in Maryland. Canopy USA’s direct and indirect interests in TerrAscend includes control over all exchangeable shares, options, and warrants previously held by Canopy in TerrAscend, as well as the debentures and loan agreement outstanding between Canopy and certain TerrAscend subsidiaries.
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