Cannabis giant Canopy Growth (WEED.TO)(CGC) has announced a deal to acquire smaller Canadian pot producer The Supreme Cannabis Company (FIRE.TO) in a bid to boost its appeal with non-medical consumers.
Smiths Falls, Ont.-based Canopy said the deal is valued at approximately $435 million on a fully diluted basis. Under the terms, Supreme Cannabis shareholders will receive 0.01165872 of a Canopy common share, and $0.0001 in cash in exchange for each Supreme Cannabis share held. Canopy said that’s a roughly 66 per cent premium based on Monday’s closing prices for both companies’ shares on the Toronto Stock Exchange.
After emerging as an early leader in the Canadian recreational cannabis market, Canopy has seen its share of non-medical sales fall as its competitors gained strength. The company hopes to regain ground with the acquisition of Supreme’s 7ACRES premium pot brand.
“Supreme’s deep commitment to superior genetics, top-tier cultivation and strict quality control, paired with Canopy’s leading consumer insights, advanced R&D and innovation capabilities, is expected to create a powerful combination that aligns with our strategic focus to generate growth with premium quality products across key categories,” Canopy Growth chief executive officer (CEO) David Klein said in a news release on Thursday.
For Supreme shareholders, the deal represents a pathway to the United States market, where Canopy is building out a CBD business ahead of potential federal pot legalization.
“We have been successful at delivering great products that achieved strong customer loyalty, and operating at levels of efficiency that are industry-leading,” Beena Goldenberg, president and CEO of Supreme Cannabis, added in the release.
“We have also built a highly sought-after premium brand in 7ACRES. Combining Supreme Cannabis with Canopy – a Canadian market leader with exposure to the United States – presents a significant value creation opportunity for both companies.”
The deal requires approval from shareholders and regulators.
More to follow.