Canopy Growth Corporation (“Canopy Growth” or the “Company”) (TSX: WEED) (NASDAQ: CGC) announced today that the Company has entered into agreements to divest its retail business across Canada which includes the stores operating under the Tweed and Tokyo Smoke retail banners. The announcement reinforces the Company’s focus on advancing its path to profitability as a premium brand-focused cannabis and consumer packaged goods (CPG) company.
The Company has reached an agreement (the “OEGRC Transaction”) with OEG Retail Cannabis (“OEGRC”), an existing Canopy Growth licensee partner that currently owns and operates the Company’s franchised Tokyo Smoke stores in Ontario. As part of this agreement, OEGRC has agreed to acquire all of Canopy Growth’s corporate stores outside of Alberta as well as all Tokyo Smoke-related intellectual property. The Company has also reached an agreement (the “FOUR20 Transaction”) with 420 Investments Ltd. (“FOUR20”) pursuant to which FOUR20 has agreed to acquire the ownership of five retail locations in Alberta. Closing of the OEGRC Transaction and the FOUR20 Transaction is subject to regulatory approvals and other customary closing conditions.
“We are taking the next critical step in advancing Canopy as a leading premium brand-focused CPG cannabis company while furthering the Company’s strategy of investing in product innovation and distribution to drive revenue growth in the Canadian recreational market,’’ said David Klein, CEO, Canopy Growth. “By realizing these agreements with organizations that possess proven cannabis retail expertise, we are providing continuity for consumers and team members. Through the best-in-class retail leadership that OEGRC and FOUR20 have demonstrated, they will continue to serve Canadian consumers with the high-quality in-store experiences that are essential for success in a new industry.’’
Operational savings realized through these transactions are expected to result in Canopy’s projected selling, general, and administrative cost savings being closer to the high end of the annualized target range expected as part of the cost reduction actions announced on April 26, 2022.
Overview of the OEGRC Transaction:
- Upon completion of the OEGRC Transaction, OEGRC will acquire ownership of 23 Tokyo Smoke and Tweed store locations across Manitoba, Saskatchewan, and Newfoundland and Labrador.
- As part of the OEGRC Transaction, the Tokyo Smoke brand will be transferred to OEGRC and any purchased stores currently branded as Tweed will be rebranded.
- The master franchise agreement between the Company and OEGRC pursuant to which OEGRC licenses the Tokyo Smoke brand in Ontario will be terminated on the closing of the OEGRC Transaction.
Overview of the FOUR20 Transaction:
- FOUR20, a licensed cannabis retailer, will purchase five of the Company’s corporate stores in Alberta. Following the close of the FOUR20 Transaction, these stores will be rebranded under FOUR20’s retail banner.
All in-store team members working in the locations being acquired will see their employment continue with OEGRC and FOUR20 pending completion of these transactions.
In addition to the foregoing divestitures, the master license agreement between Canopy Growth and Alimentation Couche-Tard Inc. with respect to the use of the Tweed brand for brick-and-mortar retail stores operating in Ontario has also been terminated.
Canopy Growth will continue to own and operate the Tweed brand, including a vast portfolio of mainstream flower, pre-rolled, and ready-to-enjoy options, as the Company looks towards providing Canadians with new ways to engage with one of the industry’s highest impact brands.
