Canadian medical marijuana producer Canopy Growth Corp.’s $430 million deal to buy Mettrum Health Corp. will go down as the biggest takeover in the history of the burgeoning global marijuana sector if it is completed as planned.
The all-stock friendly deal announced Thursday would see Canopy add two brands to its portfolio, increase its production capacity to 665,000 square feet and give it a post-acquisition cash balance of $68 million, positioning it for further growth ahead of the Canadian government’s plans to table legislation making marijuana legal in the spring.
“I think if you believe the sector’s going to happen and you believe it’s going to happen meaningfully before the next election, you need to be moving now, not talking about moving,” Canopy CEO Bruce Linton said of the company’s ambitious growth plans, which involve positioning for both medical and recreational markets in Canada and internationally.
Mettrum shareholders will receive 0.71 shares — worth $8.42 based on Canopy’s closing price Wednesday — for every Mettrum share — about 42 per cent higher than its closing price of $5.92 on the TSX Venture Exchange. Mettrum shares rose 28 per cent in Toronto trading Thursday to close at $7.60,while Canopy shares closed down 4 per cent at $11.35.
Both Canopy and Mettrum shareholders will vote on the deal at special meetings to be held in January.
Finalization of the deal came hours after the country’s Task Force on Marijuana Legalization and Regulation delivered its eagerly-awaited report to Cabinet on how the government should proceed to end centuries of prohibition. The findings are expected to made public later this month.
If legalization proceeds smoothly and a functioning market exists by 2018, as anticipated, the recreational marijuana industry could be worth $6 billion by 2021, according to a report released earlier this week by Canaccord Genuity.
The deal also furthers Canopy’s global ambitions: Mettrum has an export agreement in Australia, which combined with Canopy’s purchase of German medical marijuana distributor MedCann earlier this week and a pre-existing partnership in Brazil means the combined company would have a foothold on three continents.
In an unrelated release, Toronto-based Mettrum announced that it was voluntarily adding to the number of product lots it will recall following a Health Canada visit that found plants were exposed to an unapproved insecticide.
In our multi-part series on the state of marijuana in Canada, journalists from across the country looked at the legal, medical and business ramifications of a reefer-friendly nation, including the lessons learned from trail-blazing states such as Colorado and Oregon, how the black market for pot will change, and the hazy transition period ahead.