Canopy Growth Corporation (TSX:WEED) (NASDAQ: CGC) acquired the right to buy Wana Brands, the number one cannabis edibles brand in the U.S. by market share, upon federal cannabis legalization. The cannabis giant confirmed Thursday it has signed definitive agreements for this arrangement with Mountain High Products, LLC, Wana Wellness, LLC, and The Cima Group, LLC (collectively Wana).
Under the deal, Canopy has to provide an upfront payment of $297.5 million in cash as part of the acquisition compensation.
Wana-branded gummies are sold across 12 states in the U.S. and Canada, with plans to reach 20 U.S. states, including future recreational use markets in New York and New Jersey before the end of 2022.
The Deal Details
The agreements were formed as three separate option agreements, under which Canopy has a call option to buy 100% of the interest in each Wana entity. In addition to the upfront payment of $297.5 million, upon exercising the right to buy each Wana entity, Canopy will initiate a payment equal to 15% of the fair market value of such Wana entity at the time the option is exercised.
Furthermore, the company agreed to additional deferred payments in respect to each Wana entity as of the two and a half and the five-year anniversary of the upfront payment.
Canopy highlighted some of the strategic benefits of this deal, including:
- Strengthening of the company’s U.S. ecosystem via Wana’s current position and geographic exposure; Obtaining a strong position in the ever-growing cannabis edibles category, with gummies accounting for more than 71% of all edibles bought in both the U.S. and Canada; what’s more, based on Canopy Growth’s consumer research, edibles are expected to continue to serve as the primary point of entry for new consumers into the THC category;
- Market leadership in an edibles product category with Wana being the leading edibles brand based on market share;
- Profitable and highly scalable business model;
- Complementing Canopy’s diversified product portfolio.
“As we establish Canopy Growth as the world’s leading cannabis company, acquiring the #1 cannabis edibles brand in North America will serve to strengthen our market position in both Canada and the United States,” David Klein, CEO of Canopy Growth. “The right to acquire Wana secures another major, direct pathway into the U.S. THC market upon federal permissibility, and in Canada we’ll be adding the top-ranked cannabinoid gummies to our industry-leading house of brands. We’re confident in the future growth of the edibles category and the tremendous opportunities with Wana.”
Cassels Brock & Blackwell LLP is acting as Canadian legal counsel to Canopy Growth. Paul Hastings LLP is acting as U.S. legal counsel to Canopy Growth. Bryan Cave Leighton Paisner LLP is acting as legal counsel to Wana ownership.
Canopy’s shares were trading 1.43% higher at $13.48 per share during Thursday’s pre-market session.