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 purchased[1]. 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 market[2], 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.
“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.
