Transaction Strengthens Canopy Growth's U.S.
Ecosystem and Increases U.S. Cannabis Market Exposure Upon Federal
Permissibility
SMITHS FALLS,
ON and BOULDER, Colo., Oct. 14,
2021 /PRNewswire/ - Canopy Growth Corporation
("Canopy Growth" or "the Company") (TSX: WEED) (NASDAQ: CGC) and
Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group,
LLC (collectively, "Wana" and each, a "Wana Entity") are pleased to
announce that they have entered into definitive agreements (the
"Agreements") providing Canopy Growth with the right, upon federal
permissibility of THC in the U.S., to acquire 100% of the
outstanding membership interests of Wana, the #1 cannabis edibles
brand in North America by market
share.
Wana manufactures and sells gummies in the U.S. state of
Colorado and licenses its
intellectual property to partners, who manufacture, distribute, and
sell Wana-branded gummies across the U.S., including California, Arizona, Illinois, Michigan, and Florida giving Wana a total footprint of 12
U.S. states currently, and across Canada. Wana expects to have license
agreements in place in more than 20 U.S. states, including in
future adult-use markets in New
York and New Jersey, prior
to the end of calendar 2022.
Strategic Benefits
- Strengthens Canopy Growth's U.S. Ecosystem: Wana's
leadership position and ongoing expansion across the U.S. bolsters
Canopy Growth's product, brand, and geographic exposure to the U.S.
cannabis market upon federal permissibility.
- Dominant Edibles Category: The gummies category is one
of the fastest growing segments in both the U.S. and Canadian
cannabis markets accounting for more than 71% of all edibles
purchased1. 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 and as such having a
leadership position in the gummy category is critical.
- Market Leadership in the Edibles Product Category: Wana
is the leading cannabis edibles brand in North America based on market share, with the
largest multi-market presence of any independent edibles brand
across the U.S. gummy market, and #1 share of the Canadian gummy
market2, respectively.
- Increases Exposure to U.S. Cannabis Market Upon Federal
Permissibility: Upon exercising its right to acquire Wana,
Canopy Growth will own and operate Wana's vertically integrated
facility in Colorado as well as
its rapidly growing licensing division, which currently covers 11
states and is expected to cover more than 20 states by the end of
calendar year 2022. This expands upon the coverage provided by the
Company's existing right to acquire Acreage Holdings, Inc., a U.S.
multi-state operator, and the Company's conditional ownership
interest in TerrAscend Corp., another U.S. multi-state
operator.
- Profitable and Highly Scalable Business Model: Wana has
a profitable business with a track record of generating strong
revenue growth and category-leading gross and EBITDA margins.
Wana's proven licensing model provides an opportunity to scale the
brand ahead of U.S. federal permissibility.
- Further Strengthens Canopy Growth's Leading House of
Brands: Wana is the #1 cannabis edibles brand in North America and will complement Canopy
Growth's diversified product portfolio across the recreational
cannabis industry.
________________________
|
1 Source:
Headset data for tracked US states. Edibles includes forms such as
beverages, chocolates and other ingestibles.
|
2 Source:
Wana data and internal proprietary market share tool that utilizes
point of sales data supplied by a third-party data provider,
government agencies and Canopy Growth's retail store operations
across the country, 13W ended 9/13/21.
|
"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," said
David Klein, CEO, 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."
"Today's announcement reflects the culmination of more than a
decade of hard work, dedication and vision put forth by our
employees and partners, as well as an unwavering commitment to the
plant and -our customers," said Nancy
Whiteman, CEO and Cofounder of Wana
Brands. "We have long considered what the next phase of our
growth might look like, and this deal is not only a great testament
to our focus on bottom line growth and fiscal diligence, but also
to the value we believe Wana can bring to Canopy and its
shareholders now and in the future. We have met many partners
along the way over the past 11 years, but none have felt like the
best and right fit until today. We are incredibly humbled and
honored to be part of what Canopy Growth is building in terms of
the future of this industry."
Transaction Details
The Agreements are structured as three separate option
agreements whereby Canopy Growth has a call option to acquire 100%
of the membership interests in each Wana Entity. As consideration
for entering into the Agreements, Canopy Growth will make an
upfront cash payment (the "Upfront Payment") in the aggregate
amount of USD $297.5 million.
Upon exercise of the right to acquire each Wana Entity, Canopy
Growth will make a payment equal to 15% of the fair market value of
such Wana Entity at the time the option is exercised (the "Call
Option Payments"). As additional consideration for the right to
acquire each Wana Entity, Canopy Growth may make additional
deferred payments (the "Deferred Payments") in respect to each Wana
Entity as of the 2.5 and 5-year anniversary of the Upfront Payment,
less certain deductions. At the option of Canopy Growth, the Call
Option Payments and the Deferred Payments may be satisfied in cash,
shares or a combination thereof at the Company's sole
discretion.
Until such time as Canopy Growth exercises its right to acquire
each Wana Entity, Canopy Growth will have no economic or voting
interest in Wana, Canopy Growth will not control Wana, and the
Company and Wana will continue to operate independently.
Counsel
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.
About Canopy Growth
Canopy Growth (TSX:WEED, NASDAQ:CGC) is a world-leading
diversified cannabis and cannabinoid-based consumer product
company, driven by a passion to improve lives, end prohibition, and
strengthen communities by unleashing the full potential of
cannabis. Leveraging consumer insights and innovation, we offer
product varieties in high-quality dried flower, oil, softgel
capsule, infused beverage, edible, and topical formats, as well as
vaporizer devices by Canopy Growth and industry-leader Storz &
Bickel. Our global medical brand, Spectrum Therapeutics, sells a
range of full-spectrum products using its colour-coded
classification system and is a market leader in both Canada and Germany. Through our award-winning Tweed and
Tokyo Smoke banners, we reach our adult-use consumers and have
built a loyal following by focusing on top quality products and
meaningful customer relationships. Canopy Growth has entered into
the health and wellness consumer space in key markets including
Canada, the United States, and Europe through BioSteel sports nutrition, and
This Works skin and sleep solutions; and has introduced additional
hemp derived CBD products to the United
States through our First & Free and Martha Stewart CBD
brands. Canopy Growth has an established partnership with Fortune
500 alcohol leader Constellation Brands. For more information visit
www.canopygrowth.com.
About Wana Brands
Included in the 2020 Inc. 5000 list at #2,074 and boasting a
three-year growth rate of 203%, Wana
Brands is the No. 1 edibles brand in North America. Wana leads the industry in
quality, consistency and potency, providing a range of different
options that enable customers to select the specific cannabis
experience they want. Wana products offer diverse product forms, a
wide range of CBD/THC ratios, as well as a variety of different
dosages, onset times and duration of effects. Wana products are
available in 12 US states and 9 Canadian provinces, among others
imminently coming online. For more information or to subscribe to
Wana's e-newsletter, visit www.wanabrands.com. Follow Wana on
LinkedIn, Twitter, YouTube and Instagram. Subscribe to Wana's
Enhance Your Life Podcast.
Notice Regarding Forward-Looking Information
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 the Company or its 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. Examples of such
statements include statements with respect to future license
agreements with respect to Wana's IP in additional markets and the
timing thereof, the anticipated benefits of the transaction and the
timing of the Upfront Payment.
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 the timeline for federal permissibility in the United States, the integration of the
businesses and the ability to achieve the anticipated synergies
contemplated by the transaction; inherent uncertainty associated
with projections; the diversion of management time on
transaction-related issues; expectations regarding future
investment, growth and expansion of operations; regulatory and
licensing risks; changes in general economic, business and
political conditions, including changes in the financial and stock
markets; risks related to infectious diseases, including the
impacts of the Covid-19 pandemic; legal and regulatory risks
inherent in the cannabis industry, including the global regulatory
landscape and enforcement related to cannabis, political risks and
risks relating to regulatory change; risks relating to anti-money
laundering laws; compliance with extensive government regulation
and the interpretation of various laws regulations and policies;
public opinion and perception of the cannabis industry; and such
other risks contained in the public filings of the Company filed
with Canadian securities regulators and available under the
Company's profile on SEDAR at www.sedar.com and
with the United States Securities and Exchange Commission through
EDGAR at www.sec.gov/edgar, including the Company's
annual report on Form 10-K for the year ended March 31, 2021.
In respect of the forward-looking statements and information,
the Company has provided such statements and information in
reliance on certain assumptions that they believe are reasonable at
this time. Although the Company believes 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. Should one or more of the foregoing risks or
uncertainties materialize, or should assumptions underlying the
forward-looking information prove incorrect, actual results may
vary materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although the Company
has attempted to identify important risks, uncertainties and
factors which could cause actual results to differ materially,
there may be others that cause results not to be as anticipated,
estimated or intended. The forward-looking information and
forward-looking statements included in this news release are made
as of the date of this news release and the Company does not
undertake any 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.
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SOURCE Canopy Growth Corporation