Canopy Growth has just announced new plans to consolidate all U.S. cannabis assets into a single entity, Canopy USA, creating a U.S. holding company and an exchangeable share structure designed to enable Canopy USA to activate full ownership of U.S. cannabis investments and capitalize on U.S. cannabis market opportunities.
Constellation Brands intends to transition the existing common stock ownership interest in Canopy Growth to new exchangeable shares, protecting value for Constellation shareholders while retaining an interest in Canopy Growth through non-voting, non-participating shares.
The transition of share ownership and delivery of the Canopy Growth warrants are aligned with Constellation’s focus on core beer and wine and spirits businesses and capital allocation priorities, emphasizing a strong financial foundation, reinvestment in its core businesses and return of value to its shareholders. To date, Canopy only owns non-voting, non-participating exchangeable shares of Canopy USA that are convertible into common shares of Canopy USA. Outside investors will own 100% of Canopy USA’s common stock.
Following the announcement, Bill Newlands, Constellation’s president and CEO, expressed confidence in the new investment and continued investment in Canopy. “At the same time, this transaction and the delivery of our warrants are expected to eliminate the impact on our equity in earnings, mitigate risk to our organization and further reinforce our intention not to deploy additional investments in Canopy aligned with Constellation’s previously stated capital allocation priorities.”he reiterated. For its part, Canopy has proposed to amend its capital stock to provide for the creation of a new class of non-voting, non-participating exchangeable shares that will be convertible into Canopy common shares. If the amendment is authorized by Canopy’s shareholders, Greenstar and Canopy also intend to negotiate an exchange of up to $100 million aggregate principal amount of outstanding senior notes of Canopy due July 2023 held by Greenstar for exchangeable Shares.
