Rich covers news that Canadian cannabis giant Canopy Growth Corp. (TSX:WEED) (NYSE:CGC) will be acquiring the largest cannabis company in the United States, Acreage Holdings (OTCQX:ACRGF). He breaks down the details of the deal, explains why Canopy’s CEO Bruce Linton is an unparalleled leader and why Canopy Growth is number one.
Exciting news hit the cannabis space on Thursday, April 18, when Canadian cannabis giant Canopy Growth Corp. (TSX:WEED) (NYSE:CGC) announced its plan to acquire 100% of the shares of US multi-state cannabis operator Acreage Holdings (OTCQX:ACRGF), conditional on cannabis becoming federally legal in the US.
The deal will see Canopy Growth pay an upfront fee of $300 million USD for the rights to purchase Acreage for $3.4 billion in the event that cannabis gets legalized in the US and will secure its strategic entrance into the US market. Canopy and Acreage will also execute a licensing agreement granting Acreage access to Canopy Growth’s award-winning line-up of brands like Tweed and Tokyo Smoke, along with other intellectual property.
“They are essentially saying, ‘Hey, we are number one, we’ll always be number one and nobody can stop us from being number one,” Rich says. “By Canopy acquiring Acreage, that is a checkmate move. It’s a game over move. It signals the beginning of the end for everybody else.”
Why Rich Calls Canopy Growth CEO Bruce Linton is the CEO of the Century
One of the reasons Rich has always favored Canopy Growth is because of the company’s CEO, Bruce Linton, which he fondly referred to as the “CEO of the century.”
“Bruce Linton, the CEO of the century, has taken this stock from under $1 to where it is today at over $64 CAD,” he explains. “I applaud you, Bruce Linton. You are building shareholder equity, you’re creating shareholder value, you are a true CEO in every sense of the word.”
If you consider all of the other strategic moves made by Canopy Growth since it went public in 2014, it is clear that the cannabis giant is doing all the right things to succeed in this burgeoning market. What’s more, Canopy Growth is the first legal marijuana company to join the New York Stock Exchange (NYSE) and is also the first cannabis producer to be included in Canadian large-cap index, the S&P/TSX 60 Index.
Linton recently told the Financial Post that he expects the company to generate more than $1 billion in revenue globally during its financial year, which started on April 1. However, he doesn’t expect profitability just yet as Canopy Growth invests in clinical trials and other initiatives to “create a long future.”
“Every time he speaks, he speaks with conviction,” Rich adds.
Canopy Growth gained some serious capital last fall thanks to a $4 billion USD investment from Constellation Brands (NYSE:STZ) after the Modelo and Corona maker increased its stake in Canopy to 38%. Currently, the two companies are working on producing a CBD-infused drink that will be legal in Canada sometime this year.
Canopy Growth also owns a stake in investment company Canopy Rivers Inc. (TSXV:RIV) (OTC:CNPOF), which Rich says is another way for investors to gain access to this hot pot stock. Canopy Growth invested an additional $30 million into Canopy Rivers to strengthen the relationship between the two companies, indirectly scale its company and diversify its business portfolio.
“Canopy Rivers is Canopy Growth 2.0,” Rich explains. “Everything that Bruce Linton touches turns to gold. There is no doubt that Canopy Rivers will be a huge success.”
More Canopy Growth M&A to Come?
The deal with Canopy Growth and Acreage Holdings is a massive one and will be the biggest deal in the cannabis space once approved. However, Rich expects that this is only the beginning.
“Canopy is now essentially saying, ‘Okay guys, this is our first of many acquisitions,” Rich says. “I wouldn’t be surprised if they buy MedMen (CSE:MMEN) (OTCQX:MMNFF), I wouldn’t be surprised if they buy CWEB (CSE:CWEB) (OTCQX:CWBHF), I wouldn’t be surprised if they buy everybody. Everybody is on the table.”
“I think that Canopy is going to buy everybody. Canopy, Aurora, a few of these companies are going to end up just buying everybody.”
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