Canopy’s efforts to push through its $3.4 billion deal to acquire U.S. market leader Acreage could hinge on semantics, says the company founder.
Last month, Canadian firm Canopy Growth Corporation and Acreage Holdings jointly announced that the former had secured the right to acquire 100% of the shares of Acreage. Shareholders will receive an immediate payment of $300 million rising to $3.4 billion when cannabis has been made federally legal in the U.S. said the joint market announcement
But, Canopy’s founder and Co-CEO Bruce Linton moved to clarify this by telling CNN that the deal will conclude once it has become clear that cannabis production and sale is ‘federally permissible’ in the United States.
He said: “(It happens) when it’s ‘federally permissible’. We don’t ask the federal Government make it legal what they need to do is make it not illegal. The difference is they may well say it’s a States Rights issue, depending on how they word it, they may make it that the States have authority and jurisdiction for cannabis.”
So far, cannabis producers have only tapped into a tiny part of the potential U.S. market as it still remains illegal under U.S. federal law. Some in Congress are looking to change this through The Strengthening the Tenth Amendment Through Entrusting States Act, better known through its STATES Act acronym.
Introduced into the Senate last June, this would eliminate the conflict between state and federal law, by allowing states to determine whether or not cannabis products will be legal for medical or recreational purposes within their borders.
Yahoo Finance reports that the Canopy/Acreage deal has also raised the prospect of the success of the STATES Act. It says: “Consider that former U.S. House Speaker John Boehner sits on Acreage’s board. He’s publicly remarked that some of the most conservative U.S. lawmakers have evolving views on cannabis. Boehner is also the honorary chairman for the National Cannabis Roundtable lobbyist group, a major proponent of the STATES Act, which would allow states to legalize cannabis without federal interference.”
During Mr Linton’s interview with CNN he elaborated on the potential huge upsides of the deal: “We are paying $300m to the shareholders… for the right to buy at an exchange ratio. If and when it’s federally permissible we will swap the Acreage shares into Canopy shares.”
He continued: “This (deal) will help them get access to the least costly capital, we will lend them our know-how, and let them takeover even more in America. Canopy takes over the globe, keeps making inventions, running clinical trials, having patented stuff we can lend down, and in a year, two, or three years, we are together; this giant sophisticated entity, and who knows who is behind us.”
Acreage Holdings Chairman, CEO and President Kevin Murphy, said in a market statement: “Having access to Canopy Growth’s deep resources will enable us to innovate, develop and distribute quality cannabis brands across the U.S. and continue expanding our U.S. footprint. At the same time, a confluence of factors are making it much more difficult for a multi-state operator to achieve its full potential, including the enormous amount of cash required to scale.”