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Constellation Brands to Invest Billions in Canopy Growth

Before today, the largest ever raise by a cannabis company was $600 million CAD dollars. Now, Constellation Brands, the US alcoholic beverage giant, will be investing $4.5 billion CAD in Canopy Growth Corporation.

Constellation Brands will increase its ownership interest in Canopy Growth by acquiring 104.5 million shares directly from Canopy Growth, thereby achieving approximately 38 percent ownership when assuming exercise of the existing Constellation warrants. Constellation Brands is acquiring the new shares at a price of C$48.60 per share, which is a 37.9 percent premium to Canopy's 5-day volume weighted average price of the common shares on the Toronto Stock Exchange ("VWAP"), and a 51.2 percent premium to the closing price on August 14, 2018. Constellation will also receive additional warrants of Canopy that, if exercised, would provide for at least an additional $4.5 billion CAD to Canopy Growth.


As a result of the new shares Constellation is acquiring, Canopy Growth will immediately upon closing have proceeds of approximately $5 billion CAD [$4 billion USD] to bolster its leadership position in the global cannabis industry. This investment, the largest to date in the cannabis space, will provide funds which Canopy Growth will deploy to strategically build and/or acquire key assets needed to establish global scale in the nearly 30 countries pursuing a federally permissible medical cannabis program, while also rapidly laying the global foundation needed for new recreational cannabis markets. Canopy Growth's Canadian platform does not require additional cannabis cultivation assets, and management views other jurisdictions, including the United States, as strategic priorities requiring significant capital.

Constellation Brands has, in effect, added cannabis to their product portfolio. I have a feeling that there were talks in other countries like the UK and Germany where Canopy Growth will be building / buying greenhouses for cannabis production which will then supply Europe. That market, assuming recreational legalization, will be worth more than $100 billion.

Canopy already has $1.4 billion of assets in Canada. There will be a lot of international merger and acquisitions activity from them in the next two years. Canopy is already the global market leader in cannabis. Now, they will be expanding their empire.


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