Canopy Growth to Acquire Acreage, Wana, Jetty in US Entrance

Editor's note: After this article was published, Nasdaq Stock Market officials objected to Canopy Growth consolidating the financial results of Canopy USA in the event of the transactions related to the company's U.S. market entrance. That story can be viewed here. 

A month after Ontario-based Canopy Growth Corp. officials announced they were exiting the cannabis retail market in Canada, details emerged Oct. 25 that the company is accelerating plans to enter the U.S. market via three acquisitions.

Canopy Growth announced Tuesday the creation of a new U.S.-domiciled holding company, Canopy USA LLC, for its U.S. cannabis investments, which will enable the company to exercise rights to acquire multistate operator Acreage Holdings, leading cannabis edibles company Wana Brands, and Jetty Extracts. In addition, the new holding company will allow Canopy Growth to gain a minority ownership stake in multistate operator TerrAscend Corp.

“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,” Canopy Growth CEO David Klein said in a press release. “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 value in the near term while positioning Canopy for profitable growth and a fast start upon U.S. federal permissibility.”

According to the release, Canopy Growth’s “U.S. cannabis ecosystem” has an established presences across large-scale and rapidly developing adult-use markets, including 21 states: Arizona, Arkansas, California, Colorado, Connecticut, Florida, Illinois, Maine, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon and Pennsylvania.

Acreage CEO Peter Caldini said his New York-based company’s integration into Canopy’s U.S. ecosystem will allow shareholders of both companies to participate in a “strategic market opportunity” with aligned interests.

“An exciting evolution is now taking place in the U.S. cannabis industry, and the time is now to accelerate our union with Canopy and leverage the solid foundation we have built to fully participate in an unmatched U.S. ecosystem alongside other market leaders,” Caldini said in a public statement. “Acreage is a valuable addition to what Canopy is building, and we are excited about the opportunities to collaborate more directly with Jetty and Wana on product innovation and market expansion, creating an even stronger position ahead of federal permissibility as part of a leading North American brand powerhouse.”

Canopy Growth’s announcement comes as a recent BDSA market forecasts suggest U.S. cannabis sales will grow from $25 billion in 2021 to $42 billion in 2026, which will make up 75% of the total global cannabis sales

And the Canadian company’s accelerated plans to enter the U.S. market comes less than three weeks after industry hype following President Joe Biden’s call to pardon thousands of federal cannabis offenses and for a review of how cannabis is scheduled under the Controlled Substances Act.

RELATED: Biden's Call to Pardon Thousands of Federal Cannabis Offenses Part of Sweeping Policy Reform

In addition to acquiring Acreage, Canopy Growth’s creation of Canopy USA will allow the company the option to acquire 100% of the membership interests of Mountain High Products LLC, Wana Wellness LLC and the Cima Group LLC (collectively “Wana”). Wana is vertically integrated in Colorado and holds active licenses in 13 other states, as well as the leading market share position for edibles in Canada, according to the release.

Canopy’s new holdings company also includes the option to acquire 100% of the shares of Lemurian Inc. (Jetty), a California-based producer of cannabis extracts and leader of clean vape technology.

In addition, Canopy USA controls a conditional ownership position of approximately 13.7% in Toronto-based TerrAscend, which is vertically integrated in Pennsylvania, New Jersey, Michigan and California, and has licensed cultivation and processing operations in Maryland, according to the release.

The shares and interests in Acreage, Wana, Jetty and TerrAscend will be held, directly or indirectly, by Canopy USA. Canopy Growth will not hold a direct interest in any shares or interests for those four entities.

Below are the strategic highlights of the announcement, according to Canopy Growth:

• 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 adult-use 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 Growth’s full press release with agreement details can be viewed here.