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Summary
- The deal will be worth C$ 435 million and shareholders of both companies may benefit from it.
- Now Canopy will have a strong brand portfolio, including premium brand like 7ACRES.
- Canopy one of the largest cannabis-producing companies in terms of market capitalization worth C$ 14.4 billion.
The Canadian medicinal and recreational cannabis producer Canopy Growth Corporation (TSX:WEED) will acquire all issued and outstanding shares of The Supreme Cannabis Company Inc. (TSX:FIRE) on a fully diluted basis. The deal will be worth around C$ 435 million and the shareholders of Supreme Cannabis are expected to get 0.01165782 of a common share of Canopy Growth and C$ 0.0001 in cash in exchange for each share held of the Supreme Cannabis.
The deal comes amidst speculations that the US might legalize cannabis this year and the industry will witness a boom in the coming years.
This move may yield benefits to shareholders of both the companies and upon completion of this acquisition, Canopy will have a strong brand portfolio, including premium brand like 7ACRES. Riding on the back of its strong distribution network and strong sales, the brand is expected to grow further.
On April 1, the company had announced the completion of acquiring Ace Valley, one of Ontario's leading cannabis companies to focus on ready-to-enjoy products.
Why is Canopy Growth Acquiring Supreme Cannabis?
With this acquisition, Canopy's position in the cannabis industry will solidify and will place it among the top leaders. It is estimated that Canopy will have a 13.6 per cent market share now, including 7ACRES' holding, which is the country's best premium flower brand, It is also among the top companies which provide pre-rolled joints and a market leader in PAX vapes.
In Ontario, the Pro Forma market share (combined) is projected to be 23.3 per cent in the premium flower segment and 21.4 per cent in British Columbia.
Using Supreme Cannabis' hybrid-greenhouse cultivation facility, the company can maintain the consistency of producing premium flower at low cost and can also scale up the production.
Shareholders of Supreme Cannabis will get a premium per share of about 66 per cent based on the closing prices of Canopy common shares and Supreme cannabis shares on the Toronto Stock Exchange (TSX) at market close on April 7.
Source: Pixabay
A look at Canopy’s stock and financials
Canopy is one of the largest cannabis-producing companies in terms of market capitalization worth C$ 14.4 billion and holds a price-to-book ratio of 3.646.
The stock went up by 86.3 per cent in a year and about 13 per cent year-to-date (YTD).
The company achieved revenue of C$ 169.9 million in Q3 2021, an increase of 25 per cent from the same comparable period last year.
