Is Canopy Growth About to Become a Mega Marijuana Stock Company?
Canopy Growth Corp (CVE:CGC, TSE:CGC), Canada’s largest public medical marijuana company, may get even bigger. Canopy Growth has offered $430.0 million to acquire Toronto-based Mettrum Health Corp (CVE:MT), which would form a dominant pot company servicing nearly half of Canada’s current medical marijuana patient base.
The deal would be done through Canopy Growth shares, which closed at $11.80 on Wednesday. Mettrum shareholders will receive 0.7132 common shares of Canopy Growth per common MT share. That comes out to around $8.42 for Mettrum shareholders, which is about 42% higher than the $5.92 per share that MT stock closed at on Wednesday. (Source: “Canopy Growth to acquire rival weed producer in $430M deal,” CTV News, December 1, 2016.)
“Canopy Growth and Mettrum have enjoyed a collaborative industry relationship working on a number of patient and industry advocacy efforts,” said Michael Haines, CEO of Mettrum, in a statement. (Source: “Canopy Growth Corporation to acquire Mettrum for $430M — making a mega-company serving half Canada’s medical pot users,” Financial Post, December 1, 2016.)
As of Thursday morning, MT stock was trading at $7.93, up 34%. Canopy Growth was up 4.6%.
The deal is subject to approval by shareholders in both companies who will vote at a special meeting to be held in January.
Canadian companies are seen as first-movers in the marijuana market and are poised to benefit from global liberalization of laws and regulations, according to Canaccord Genuity Group Inc (TSE:CF) analysts in a report released on Monday.
“Canada is also at the forefront of this change, as one of only a few countries where marijuana is regulated at the federal level, with plans to legalize recreational cannabis in the next year,” the analysts wrote.
They stated in the report that the Canadian medical market will be worth $1.8 billion in retail sales by 2021. The recreational market could dramatically affect the business, however, pushing as much as $6.0 billion in retail sales by that same year.
“You think over the next two to three years, how valuable this asset will be in the context of international demand, domestic, recreational, and medical. When I look at it that way, it appears to be a pretty practical thing to do,” said Canopy Growth Chairman and CEO Bruce Linton. (Source: CTV News, op cit.)
And this isn’t even the only acquisition proposal this week for Canopy Growth: the company also made a bid for German-based MedCann, a cannabis distributor, importer, and manufacturer. That deal is also all stock and is worth around $7.2 million based on Canopy Growth’s November 25 closing price of $10.60. Canopy was able to place its Tweed-branded buds in German pharmacies through MedCann, giving the Canadian marijuana stock a foothold in Europe.