SMITHS FALLS, Ontario and
NEW YORK, April 18, 2019 /PRNewswire/ -- Canopy Growth
Corporation ("Canopy Growth") (TSX: WEED) (NYSE: CGC) and
Acreage Holdings, Inc. ("Acreage") (CSE: ACGR.U) (OTC:
ACRGF) (FSE: 0ZV) (together, the "Companies") are pleased to
announce that they have entered into a definitive arrangement
agreement that grants Canopy Growth the right to acquire 100
percent of the shares of Acreage (the "Right"), with a
requirement to do so at such time as cannabis production and sale
becomes federally legal in the United
States (the "Transaction"), subject to obtaining the
requisite prior approval of the shareholders of each of Acreage and
Canopy Growth, respectively (the "Shareholder Approval"), as
well as the approval of the Supreme Court of British Columbia (the "Court
Approval").
Following the approval of Canopy Growth and Acreage shareholders
as well as the Supreme Court of British
Columbia, under the terms of the arrangement agreement (the
"Agreement"), Acreage Holders (as defined below) will
receive an immediate aggregate total payment of US$300 million or approximately US$2.55 per Acreage Subordinate Voting Share (the
"Up-Front Cash Premium") based on the currently outstanding
Subordinate Voting Shares of Acreage and conversion of certain
convertible securities described below. In addition, upon the
exercise of the Right, holders of subordinate voting shares of
Acreage (the "Acreage Subordinate Voting Shares") will
receive 0.5818 of a common share of Canopy Growth (the "Canopy
Shares") for each Acreage Subordinate Voting Share held (the
"Exchange Ratio") at the time of closing of the Transaction.
Upon exercise of the Right, the total consideration
payable pursuant to the Transaction is valued at
approximately US$3.4 billion on
a fully-diluted basis, represents a premium of 41.7% over the
30-day volume weighted average price of the Acreage Subordinate
Voting Shares on the Canadian Securities Exchange (the "CSE")
ending April 16, 2019 (based on the
Exchange Ratio, Up-Front Cash Premium and the 30-day volume
weighted average price of Canopy Shares as at April 16, 2019).
The Companies will also execute a licensing agreement granting
Acreage access to Canopy Growth's award-winning line-up of brands
such as Tweed and Tokyo Smoke, along with other intellectual
property. Once the Right is exercised, Acreage will become part of
a leading global cannabis company with access to markets beyond the
U.S. Until then, the two companies will continue to operate
independently.
"Today we announce a complex transaction with a simple
objective. Our right to acquire Acreage secures our entrance
strategy into the United States as
soon as a federally-permissible pathway exists," said Bruce Linton, Chairman and co-CEO, Canopy
Growth. "By combining Acreage's management team, licenses and
assets with Canopy Growth's intellectual property and brands, there
will be tremendous value creation for both companies'
shareholders."
"From the first day we created our company, providing
exceptional customer care and delivering shareholder value have
been our top priorities. This transaction will help accomplish
both," said Acreage Holdings Chairman, CEO and President
Kevin Murphy. "When the right is
exercised having access to Canopy Growth's deep resources will
enable us to innovate, develop and distribute quality cannabis
brands across the U.S. and continue expanding our U.S. footprint.
At the same time, a confluence of factors are making it much more
difficult for a multi-state operator to achieve its full potential,
including the enormous amount of cash required to scale. Our Board
of Directors, management team and I are pleased to deliver
significantly increased liquidity to our shareholders and put
ourselves in an even stronger position to deliver continued and
significant upside."
Once the Right is exercised, the combined infrastructure,
intellectual property, brands and organizational resources are
expected to create a global cannabis powerhouse, with an
anticipated leadership position in every targeted international
market for legal cannabis sales, including the U.S., Canada, and select markets across Latin America, Europe and Asia-Pacific.
Additional Information:
- Canopy Growth earned national visibility in the United States when it listed its common
shares on the New York Stock Exchange, becoming the first cannabis
company to do so. Canopy Growth's U.S. hemp operations are being
established in parallel to the Acreage entrance strategy, and will
include hemp cultivation, extraction, processing, and packaging
products for sale across the United
States, where permissible by regulations.
- Acreage is a leading multi-state operator in U.S. cannabis. It
owns or has managed services agreements in place for
cannabis-related licenses across 20 states (giving it the right to
develop), including 87 dispensaries and 22 cultivation and
processing sites. Its Board of Directors includes former Canadian
Prime Minister Brian Mulroney and
former Speaker of the U.S. House of Representatives, John Boehner.
- Upon exercising the Right, the combined operations of Acreage
and Canopy Growth would immediately create the undisputed leader in
U.S. cannabis, the only relevant market where Canopy Growth does
not yet have a major presence.
- According to the Arrangement, Acreage will be able to issue up
to 58,000,000 Acreage Subordinate Voting Shares (implied valuation
of US$1.4 billion based on Canopy's
closing share price at the Exchange Ratio), together with a further
5,221,905 Acreage Subordinate Voting Shares in respect of certain
potential acquisitions, which if the Right is exercised shall
become future Canopy Shares, which, combined with an expectation of
enhanced liquidity should further accelerate Acreage's ability to
fund organic and accretive rapid expansion.
- Canopy Growth and Constellation Brands, Inc. ("Constellation
Brands") – Canopy Growth's largest shareholder and Fortune 500
beverage alcohol leader – will, as part of the Arrangement extend
the terms of certain warrants and restructure other rights. See
Constellation's press release dated April
18, 2019 "Constellation Brands Enters Into Agreement with
Canopy Growth Corporation to Modify Warrants and Other
Rights".
- Acreage President, George Allen
will depart the company effectively immediately. Acreage Chairman
and CEO Kevin Murphy will assume the
duties of President.
Way More Detail
The Transaction will be carried out by way of a court-approved
plan of arrangement under the Business Corporations Act
(British Columbia) (the
"Arrangement") and will require the approval of shareholders
of both Canopy Growth and Acreage at special meetings expected to
take place in June 2019. In addition
to shareholder approval, the Transaction is subject to applicable
regulatory, court and stock exchange approvals and certain other
closing conditions.
Pursuant to the terms of the Transaction, the Acreage
Subordinate Voting Shares, which may be acquired securities holders
of proportionate voting shares of Acreage (the "Acreage
Proportionate Voting Shares"), holders of multiple voting
shares of Acreage (the "Acreage Multiple Voting Shares") and
holders of units (the "Acreage Unit Holders") in High Street
Capital Partners, LLC and shares of Acreage Holdings WC, Inc. (the
"USCo2 Holders"), on conversion or exchange thereof, as applicable,
will be subject to the Right and entitled to the Up-Front Cash
Premium.
Under the terms of the Agreement, Canopy Growth will pay the
Up-Front Cash Premium to the holders of Acreage Subordinate Voting
Shares, Acreage Proportionate Voting Shares and Acreage Multiple
Voting Shares as well as Acreage Unit Holders and the USCo2 Holders
(collectively, the "Acreage Holders"). There will be an
Up-Front Cash Premium paid to the Acreage Holders based on the
currently outstanding securities of Acreage.
Following the federal legalization of cannabis in the United States (the "Triggering
Event") and certain other conditions to closing, each Acreage
Proportionate Voting Share and Acreage Multiple Voting Share will
automatically convert into Acreage Subordinate Voting Shares in
accordance with their terms and thereafter each Acreage Subordinate
Voting Share will be automatically exchanged for Canopy Shares
based on the Exchange Ratio. On closing of the Transaction, Acreage
Unit Holders will have the right to convert their units, and USCo2
Holders will have the right to convert their shares, into Canopy
Shares based on the Exchange Ratio. Acreage Unit Holders will be
required to convert into Canopy Shares three years following the
closing of the Transaction. If the Triggering Event is not
satisfied or waived within 90 months from the payment of the
Up-Front Cash Premium, the Agreement will terminate.
After giving effect to the Transaction, assuming conversion of
all securities of Acreage following a Triggering Event, Acreage
Holders will hold approximately 12.1% ownership in Canopy Growth
(on a pro forma basis) and up to 16.6% if permitted acquisitions
are completed prior to the Trigger Event. Pursuant to the
Transaction, Acreage is permitted to issue up to an additional
58,000,000 Acreage Subordinate Voting Shares (or the equivalent
number of convertible securities), together with a further
5,221,905 Acreage Subordinate Voting Shares (or the equivalent
number of convertible securities) in respect of certain potential
acquisitions by Acreage.
Constellation Brands Amendments
Completion of the Transaction is conditional on the approval by
holders of Canopy Shares of the issuance of the Canopy Shares
pursuant to the Transaction and certain amendments to the existing
warrants held by a subsidiary of Constellation Brands. Due to the
scope of the proposed transaction, Canopy Growth and Constellation
Brands have amended the investor rights agreement as outlined
here:
- The extension of the expiry date for certain warrants held by
Constellation Brands: In addition to the 18.9 million warrants
associated with the November 2017
Canopy investment, Constellation also currently has 139.7 million
warrants in Canopy, which upon shareholder approval would become
exercisable over a period of five to eight years from November 1, 2018, compared to the previous
three-year period. This includes 88.5 million Tranche A warrants,
which are exercisable at a price per share of C$50.40 and 51.2 million Tranche B warrants, of
which 38.4 million, or 75 percent, are exercisable at a price per
share of C$76.68. The remaining 25
percent of the original Tranche B warrants will become Tranche C
warrants and will be exercisable at Canopy's five-day volume
weighted average price of the common shares on the Toronto Stock
Exchange ("VWAP") immediately prior to exercise. If Canopy
exercises its right to acquire the shares of Acreage and
Constellation were to exercise all of their outstanding Canopy
warrants, Constellation's ownership in Canopy is not expected to
exceed 50 percent.
- If Constellation exercises Tranche A warrants in full, Canopy
has committed to repurchase the lesser of 25 percent of its issued
shares to Acreage or a dollar amount equal to 25 percent of the
implied enterprise value of Acreage within 24 months of the date of
Constellation's warrant exercise.
- Constellation would be permitted to purchase up to 20 million
Canopy shares in the open market prior to the warrants being
exercised or terminated, provided that for each share purchased by
Constellation, the number of Tranche B warrants is decreased by
one.
- Constellation will continue to maintain its current level of
representation on Canopy's Board of Directors.
With these Amendments, Constellation continues using its cash
flow to generate a return for its shareholders while Canopy Growth
continues to deploy the USD $4
billion investment made by Constellation in November 2018.
Acreage Board Recommendation
The board of directors of Acreage (the "Acreage Board"),
on the unanimous recommendation of a special committee of
independent directors of Acreage (the "Acreage Special Committee"),
has unanimously approved the Transaction and recommends that
shareholders of Acreage vote in favour of the resolution to approve
the Transaction.
The Acreage Board and the special committee have obtained a
fairness opinion from each of Canaccord Genuity Corp. and INFOR
Financial Inc. that, as of the date of the respective opinions, and
subject to the assumptions, limitations, and qualifications on
which such opinions are based, the consideration to be received by
Acreage Holders pursuant to the Transaction is fair, from a
financial point of view, to the Acreage Holders.
Acreage Shareholder Approval
The Transaction requires approval by at least 66⅔% of the
holders of the Acreage Subordinate Voting Shares, Acreage
Proportionate Voting Shares and Acreage Multiple Voting
Shares. Additionally, pursuant to Multilateral Instrument
61-101 - Protection of Minority Security Holders in Special
Transactions, the Transaction requires approval by at least a
majority of disinterested holders of the Acreage Subordinate Voting
Shares, Acreage Proportionate Voting Shares and Acreage Multiple
Voting Shares, each voting separately as a class.
Certain Acreage directors and officers have entered into voting
and support agreements pursuant to which they have agreed, among
other things, to vote in favor of the Transaction. The directors
and officers of Acreage have also agreed to certain lock-up terms
with respect to their current holdings of Acreage securities.
Canopy Board Recommendation
Greenhill & Co. Canada Ltd. ("Greenhill") acted as financial advisor to
Canopy Growth and provided an independent fairness opinion to the
board of directors of Canopy Growth (the "Canopy Board") that the
Exchange Ratio payable pursuant to the Transaction is fair, from a
financial point of view, to Canopy Growth. Upon receipt of the
fairness opinion from Greenhill,
the Transaction and the Amendments were unanimously approved by the
Canopy Board, other than directors who abstained from voting on the
transactions as a result of the Amendments. All Board members
support the Transaction and the Amendments.
Canopy Shareholder Approval
The issuance of the Canopy Shares in connection with the
Transaction and certain of the amendments will require the approval
of a simple majority of the disinterested shareholders of Canopy
Growth present at a special meeting (the "Canopy
Meeting").
Additional Transaction Terms
The Transaction is subject to, among other things, approval from
the CSE, the Toronto Stock Exchange and the New York Stock
Exchange, the Supreme Court of British
Columbia and certain other regulatory approvals and closing
conditions. The Agreement contains representations, warranties and
covenants, including a termination fee in the amount of
US$150 million payable by Acreage in
the event that the Transaction is terminated in certain
circumstances. The Agreement also includes certain non-solicitation
covenants subject to the right of Acreage to accept a superior
proposal in certain circumstances, with Canopy Growth having a
five-business day right to match any such superior proposal
received by Acreage.
Additional details of the Transaction and the Amendments will be
provided to shareholders of Canopy Growth and Acreage in
information circulars to be mailed to shareholders.
Advisors
Cassels Brock & Blackwell LLP
and Paul Hastings LLP acted as legal counsel to Canopy Growth.
PricewaterhouseCoopers LLP (Canada) acted as finance advisor to Canopy
Growth. Ernst & Young LLP (EY) acted as tax
advisors to Canopy Growth. DLA Piper (Canada) LLP and Cozen O'Connor acted as legal
counsel to Acreage. Canaccord Genuity Corp. acted as financial
advisor to Acreage and INFOR Financial Inc. acted as financial
advisor to the special committee of Acreage. Canaccord Genuity
Corp. and INFOR Financial Inc. provided a fairness opinion to the
Acreage Board and the Acreage Special Committee
respectively. Stikeman Elliott LLP acted as legal counsel
to the Acreage Special Committee.
About Canopy Growth
Canopy Growth is a world-leading
diversified cannabis and hemp company, offering distinct brands and
curated cannabis varieties in dried, oil and Softgel capsule forms.
Canopy Growth offers medically approved vaporizers through its
subsidiary, Storz & Bickel GMbH & Co. KG. From product and
process innovation to market execution, Canopy Growth is driven by
a passion for leadership and a commitment to building a world-class
cannabis company one product, site and country at a time. Canopy
Growth has operations in over a dozen countries across five
continents.
Canopy Growth is proudly dedicated to educating healthcare
practitioners, conducting robust clinical research, and furthering
the public's understanding of cannabis, and through its wholly
owned subsidiary, Canopy Health Innovations, has devoted millions
of dollars toward cutting edge, commercializable research and IP
development. Canopy Growth works with the Beckley Foundation and
has launched Beckley Canopy Therapeutics to research and develop
clinically validated cannabis-based medicines, with a strong focus
on intellectual property protection. Canopy Growth acquired assets
of leading hemp research company, ebbu, Inc. ("ebbu"). Intellectual
Property ("IP") and R&D advancements achieved by ebbu's team
apply directly to Canopy Growth's hemp and THC-rich cannabis
genetic breeding program and its cannabis-infused beverage
capabilities. Through partly owned subsidiary Canopy Rivers Inc.,
Canopy Growth is providing resources and investment to new market
entrants and building a portfolio of stable investments in the
sector.
From our historic public listing on the Toronto Stock Exchange
and New York Stock Exchange to our continued international
expansion, pride in advancing shareholder value through leadership
is engrained in all we do at Canopy Growth. Canopy Growth has
established partnerships with leading sector names including
cannabis icon Snoop Dogg, breeding legends DNA Genetics and Green
House seeds, Battelle, the world's largest nonprofit research and
development organization, and Fortune 500 alcohol leader
Constellation Brands, to name but a few. Canopy Growth operates ten
licensed cannabis production sites with over 4.4 million square
feet of production capacity, including over 500,000 square feet of
GMP certified production space. For more information visit
www.canopygrowth.com.
About Acreage
Headquartered in New York City, Acreage is the largest
vertically integrated, multi-state owner of cannabis licenses and
assets in the U.S. with respect to the number of states with
cannabis related licenses, according to publicly available
information. Acreage owns licenses to operate or has
management services agreements in place with license holders to
assist in operations in 20 states (including pending acquisitions)
with a population of approximately 180 million Americans, and an
estimated 2022 total addressable market of more than $17 billion in legal cannabis sales, according to
Arcview Market Research. Acreage is dedicated to building and
scaling operations to create a seamless, consumer-focused branded
cannabis experience. Acreage's national retail store brand,
The Botanist, debuted in 2018.
Forward-Looking Statement
This news release contains
"forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995 and
"forward-looking information" within the meaning of applicable
Canadian securities legislation. Often, but not always,
forward-looking statements and information can be identified by the
use of words such as "plans", "expects" or "does not expect", "is
expected", "estimates", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases
or state that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved.
Forward-looking statements or information involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Canopy Growth, Acreage or
their respective subsidiaries to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements or information contained in this
news release. These forward-looking statements include, but are not
limited to, statements relating to our expectations with respect
to: the timing and outcome of the Transaction; the anticipated
benefits of the Transaction to the parties and their respective
security holders; impact of the Transaction and anticipated growth
of the combined entity; and the anticipated timing of the
Meeting.
Risks, uncertainties and other factors involved with
forward-looking information could cause actual events, results,
performance, prospects and opportunities to differ materially from
those expressed or implied by such forward-looking information,
including assumptions as to the time required to prepare and mail
security holder meeting materials; the ability of the parties to
receive, in a timely manner and on satisfactory terms, the
necessary regulatory, court and shareholder approvals; the ability
of the parties to satisfy, in a timely manner, the other
conditions; the likelihood of the Triggering Event being satisfied
or waived by the outside date; the ability of the parties to
satisfy, in a timely manner, the conditions to closing following
the satisfaction or waiver of the Triggering Event; other
expectations and assumptions concerning the Transaction; and such
risks contained in Canopy Growth's annual information form dated
June 28, 2018 and in Acreage's annual
information form dated February 14,
2019 and filed with Canadian securities regulators available
on Canopy Growth and Acreage's respective issuer profiles on SEDAR
at www.sedar.com. Readers are cautioned that the foregoing list of
factors is not exhaustive.
In respect of the forward-looking statements and information
concerning the anticipated benefits and completion of the
Transaction and the anticipated timing for completion of the
Transaction, Canopy Growth and Acreage have provided such
statements and information in reliance on certain assumptions that
they believe are reasonable at this time. Although Canopy Growth
and Acreage believe that the assumptions and factors used in
preparing the forward-looking information or forward-looking
statements in this news release are reasonable, undue reliance
should not be placed on such information and no assurance can be
given that such events will occur in the disclosed time frames or
at all. The forward-looking information and forward-looking
statements included in this news release are made as of the date of
this news release and Canopy Growth and Acreage do not undertake an
obligation to publicly update such forward-looking information or
forward-looking information to reflect new information, subsequent
events or otherwise unless required by applicable securities
laws.
There can be no assurance that the Transaction, including the
Triggering Event, will occur, or that it will occur on the terms
and conditions contemplated in this news release. The Transaction
could be modified, restructured or terminated. Actual results could
differ materially from those currently anticipated due to a number
of factors and risks.
The Transaction cannot close until the required shareholder,
court and regulatory approval is obtained. There can be no
assurance that the Transaction will be completed as proposed or at
all. Investors are cautioned that, except as disclosed in the
management information circulars to be prepared in connection with
the Transaction, any information released or received with respect
to the Transaction may not be accurate or complete and should not
be relied upon.
The Canadian Securities Exchange has not reviewed, approved or
disapproved the content of this news release.
Canopy Growth Contact, Caitlin
O'Hara, Media Relations, Caitlin.ohara@canopygrowth.com,
613-291-3239; Investor Relations, Tyler
Burns, Tyler.burns@canopygrowth.com, 855-558-9333 ex 122;
Director, Bruce Linton,
tmx@canopygrowth.com; Acreage Contact, Howard Schacter, Head of Communications,
h.schacter@acreageholdings.com, 646-600-9181; Investor Relations,
Steve West,
investors@acreageholdings.com, 646-600-9181
View original
content:http://www.prnewswire.com/news-releases/canopy-growth-announces-plan-to-acquire-leading-us-multi-state-cannabis-operator-acreage-holdings-300834753.html
SOURCE Canopy Growth Corporation