Canopy Growth Buys Supreme Cannabis Co. In $345M Deal: What Investors Need To Know

Canopy Growth Corporation WEED CGC is poised to merge with The Supreme Cannabis Company, Inc. FIRE SPRWF.

The Canadian cannabis giant said Thursday that it agreed to acquire Supreme Cannabis' issued and outstanding common shares for about CA$435 million ($345.7 million).

The deal follows Canopy Growth's purchase last week of cannabis brand Ace Valley. 

The Canopy-Supreme Transaction Details: Under the terms of the agreement, each Supreme Cannabis share is worth 0.01165872 of a Canopy common share and $0.0001 in cash.

Apart from shareholder and court approvals, under the Canada Business Corporations Act, the transaction is also subject to TSX approval and approval under the Competition Act.

In addition, Supreme Cannabis shareholders will receive a 66% premium per share calculated using Supreme Cannabis' and Canopy's Wednesday, April 7 closing prices on the Toronto Stock Exchange.

Cassels Brock & Blackwell LLP agreed to advise Canopy on the deal.

Why It Matters: The acquisition will boost Canopy's brand portfolio by bringing the 7ACRES and 7ACRES Craft Collective brands under its umbrella.

It will also strengthen its cultivation capacities through Supreme Cannabis' hybrid-greenhouse at Kincardine, Ontario, Canopy said. 

Supreme Cannabis shareholders expect to benefit from Canopy's sales and distribution channels and research and development capacities.

Moreover, Canopy's U.S. CBD business will enhance expansion to the U.S. cannabis market.

"Combining Supreme Cannabis with Canopy — a Canadian market leader with exposure to the United States — presents a significant value creation opportunity for both companies. We look forward to working with Canopy to complete this transaction," Beena Goldenberg, president and CEO of Supreme Cannabis, said in a statement. 

What's Next: Canopy said it expects to achieve potential cost synergies of roughly CA$30 million within two years following the closing of the acquisition.

"As we continue to expand our leading brand portfolio, we're excited to reach more consumers through Supreme's premium brands and high-quality products, further solidifying Canopy's market leadership," said Canopy Growth CEO David Klein.

CGC, SPRWF Price Action: Canopy Growth shares were down 2.3% at $29.25 at last check. Supreme Cannabis shares were up 55% at 32 cents. 

Photo by Ryan Lange on Unsplash.