Canopy Growth Unveils $ 3.4 Billion US Cannabis Company Acquisition Project – New Cannabis Ventures

Canopy Growth announces its intention to acquire Acreage Holdings, the leading US operator in the multi-state cannabis industry.

Proposed Agreement Complements CBD US Canopy Growth Strategy with Fast Track to US Cannabis Markets, Once Authorized by the Federal Government

The structure of the transaction should provide better access to capital for areas, paving the way for accelerated expansion

SMITHS FALLS, ON and NEW YORK, April 18, 2019 / CNW / – Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) and Acreage Holdings, Inc. ("Acreage") (CSE: ACGR .U) (OTC: ACRGF) (FSE: 0ZV) (together, the "Companies") are pleased to announce that they have entered into a definitive agreement that gives Canopy Growth the right to do business. Acquire 100% Acreage Shares (the "Right"), with the obligation to do so when the production and sale of cannabis becomes legally federal in the United States (the "Transaction"), subject to the prior approval of Acreage and Canopy Shareholders, respectively (the "Shareholder Approval") and the approval of the Supreme Court of British Columbia. British (the "Court approval").

Following the approval of the shareholders of Canopy Growth and Acreage, as well as the Supreme Court of British Columbia, pursuant to the Arrangement Agreement (the "Agreement"), the holders of the acquisition (as defined below) will receive an immediate total payment of $ 300. US $ 2.55 per Subordinate Voting Share per Area (the "Initial Cash Bonus") on the basis of the currently outstanding Subordinate Voting Shares and the conversion of certain Convertible Securities described below. after. In addition, upon the exercise of the right, holders of Acreage Subordinate Voting Shares (the "Subordinate Voting Shares") will receive 0.5818 of one common share of Canopy Growth (the "Subordinate Voting Shares"). of Canopy ") for each Subordinate Voting Share held (the" Exchange Ratio ") at the time of closing of the transaction. When exercising the right, the total consideration payable under the transaction is estimated at approximately US $ 3.4 billion on a fully diluted basis, representing a premium of 41.7% on the weighted average price. based on the 30-day volume of the Subordinate Voting Shares of the Canadian Securities Exchange (the "CST") ending April 16, 2019 (based on the exchange ratio, the cash the purchase and the 30-day volume-weighted average price of Canopy shares as of April 16, 2019).

The companies will also enter into a licensing agreement granting Acreage access to the award-winning range of brands such as Tweed and Tokyo Smoke, as well as other intellectual property rights. Once this right has been exercised, Acreage will become an integral part of a leading cannabis company with access to markets beyond the United States. Until then, the two companies will continue their activities independently.

Today, we announce a complex transaction with a simple goal. Our right to Acreage Acquires our strategy of entering the United States as soon as a path allowed by the federal government exists. By combining Acreage's management team, licenses and assets with Canopy Growth's intellectual property and brands, the shareholders of both companies will create significant value.

Bruce Linton, President and Co-Chief Executive Officer, Canopy Growth

"From the first day we created our company, providing exceptional customer service and generating shareholder value were our top priorities. This transaction will help achieve both, "said President, CEO and President of Acreage Holdings Kevin Murphy. "Exercising this right with access to Canopy Growth's deep resources will enable us to innovate, develop and distribute quality cannabis brands in the United States and continue to expand our environmental footprint in the United States. At the same time, a convergence of factors much more often prevents a multi-state operator from realizing its full potential, including the huge amount of cash needed for its development. "

Our board of directors, our management team and I are pleased to provide significantly greater liquidity to our shareholders and position ourselves even more in a strong position to generate significant and continuous upside potential.

Acreage Holdings Chairman, CEO and Chairman Kevin Murphy

Once the right is exercised, the combined infrastructure, intellectual property, brands and organizational resources should create a global cannabis engine, with a leading position in all international markets targeted for the legal sale of cannabis, including including the United States, Canada and certain markets. in Latin America, Europe and Asia-Pacific.

Additional information:

• Canopy Growth gained national exposure in the United States by listing its common shares on the New York Stock Exchange, becoming the first cannabis company to do so. In the United States, Canopy Growth's hemp operations are being implemented in conjunction with the Acreage entry strategy and will include hemp growing, extracting, processing and packaging products for sale in the United States. United, under the conditions authorized by the regulations.
• Acreage is a major multi-state operator in American cannabis. It owns or has managed existing service agreements for cannabis licenses in 20 states (which gives it the right to expand), including 87 dispensaries and 22 cultivation and processing sites. Its board of directors includes former Canadian Prime Minister Brian Mulroney and former Speaker of the US House of Representatives John Boehner.
• After exercising this right, the combined activities of Acreage and Canopy Growth would immediately create the undisputed leader in US cannabis, the only relevant market on which Canopy Growth does not yet have a significant presence.
• Under the Arrangement, Acreage may issue up to 58,000,000 Subordinate Voting Shares (implicit valuation of US $ 1.4 billion based on the Canopy closing rate at the Exchange Rate), as well as 5 An additional 221,905 Subordinate Voting Shares for potential acquisitions, which, if exercised, will become future shares of Canopy, which, combined with increased liquidity expectations, should further accelerate Acreage's ability to fund expansion. organic and accretive.
• Canopy Growth and Constellation Brands, Inc. ("Constellation Brands") – the largest shareholder of Canopy Growth and the leader in the Fortune 500 liquor sector – will, as part of the Arrangement, extend the terms of certain warrants and restructure their other rights. See Constellation press release dated April 18, 2019 "Constellation Brands Signs Agreement with Canopy Growth Corporation to Amend Warrants and Other Rights".
• The acquisition's president, George Allen, will leave the company immediately. Acreage President and CEO Kevin Murphy will assume the role of President.

More details

The transaction will be effected through a court-approved plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement") and will require the approval of the shareholders of Canopy Growth and Acreage at special meetings to be held. June 2019. In addition to shareholder approval, the transaction is subject to applicable regulatory, court and securities approvals and certain other closing conditions.

In accordance with the terms of the transaction, the Acreage Subordinate Voting Shares, which may be holders of Acreage's pro rata voting shares (the "Proportional Voting Shares"), the holders of Acreage Multiple Voting Shares (the "Multiple Voting Shares") and the Unitholders (the "Area Unitholders") of High Street Capital Partners, LLC and Acreage Holdings WC, Inc. Shares (the "USCo2 Holders"), when converted or exchanged, as the case may be, entitlement and are entitled to the Advance Cash Bonus.

Under the terms of the agreement, Canopy Growth will pay the initial cash premium to the holders of "Acreage" subordinate voting shares, "Acreage" proportional voting shares and multiple voting holders of "Acreage" units and holders of USCo2 Area holders "). An initial cash bonus will be paid to the holders of the acreage, based on the outstanding securities currently outstanding.

Following the federal legalization of cannabis in the United States (the "Trigger Event") and certain other conditions up to closing, each proportional voting share and each share entitled to multiple vote corresponding to an area automatically converted into Subordinate Voting Shares in accordance with their terms and conditions. Acreage Subordinate Voting Shares will automatically be exchanged for Canopy Shares based on the Exchange Ratio. At the closing of the transaction, the surface unit holders will have the right to convert their units and the USCo2 holders will have the right to convert their shares, into Canopy shares, based on the ratio of 39; exchange. Holders of acreage units will be required to convert Canopy shares three years after the closing of the transaction. If the triggering event is not satisfied or is not canceled within 90 months of the payment of the initial cash premium, the contract will be terminated.

After taking into account the transaction, assuming that all Acreage shares are converted following a trigger event, the agreement holders will hold approximately 12.1% of Canopy Growth's interest (on a pro-active basis). forma) and up to 16.6% if the authorized acquisitions are completed before the closing date. Trigger event. Under the transaction, Acreage is authorized to issue up to 58,000,000 additional subordinate voting shares (or an equivalent number of convertible securities), as well as an additional 5,221,905 Subordinate Voting Shares ( or an equivalent number of convertible securities) of certain potential acquisitions by Acreage.

Constellation Mark Amendments

The completion of the transaction is conditional upon the approval by the holders of the Canopy Shares of the issuance of the Canopy Shares pursuant to the Transaction and certain amendments to the existing Warrants held by a subsidiary of Constellation Brands. Due to the scope of the proposed transaction, Canopy Growth and Constellation Brands changed the investor rights agreement as follows:

• The extension of the expiry date of certain warrants held by Constellation Brands: In addition to the 18.9 million warrants associated with Canopy's investment in November 2017, Constellation also holds 139.7 million warrants in Canopy which, with the approval of their shareholders, could be exercised over a period of five to eight years from November 1, 2018, as compared to the previous three-year period. This includes 88.5 million warrants of tranche A, which can be exercised at a price per share of 50.40 Canadian dollars and 51.2 million warrants of tranche B, of which 38.4 million or 75% may be exercised at Can $ 76.68 per share. The remaining 25% of the original B tranche warrants will become Series C warrants and may be exercised at Canopy's five-day volume weighted average price of Common Shares on the Toronto Stock Exchange ("VWAP"). Immediately before the exercise. If Canopy exercises its right to acquire the Acreage and Constellation Shares if they exercise all of their outstanding Canopy Warrants, Constopy's interest in Canopy should not exceed 50%.
• If Constellation exercises all of the A tranche warrants, Canopy has committed to repurchase the lesser of 25% of its issued shares in Acreage or a dollar amount equal to 25% of the implied value of Acreage within 24 months following the exercise date of the Constellation Warrants. .
• Prior to exercising or terminating the Warrants, Constellation would be permitted to purchase up to 20 million Canopy Shares in the open market, provided that for each share purchased by Constellation, the number of Warrants in the Unit B be reduced by one.
• Constellation will continue to maintain its current level of representation on the Canopy Board of Directors.

With these changes, Constellation continues to use its cash flow to generate a return for its shareholders, while Canopy Growth continues to deploy the $ 4 billion investment made by Constellation in November 2018.

Council recommendation area

The board of directors of Acreage (the "Acquisition Board"), on the unanimous recommendation of a special committee of Acreage independent directors (the "Special Acquisition Committee"), approved unanimously the transaction and recommends to shareholders of Acreage to vote in favor of the resolution to approve the transaction.

The area board and the special committee obtained an opinion on the fairness of Canaccord Genuity Corp. and INFOR Financial Inc. as of the date of the respective opinions and subject to the assumptions, limitations and qualifications on which such opinions are based. As a result, the consideration to be received by the acreage holders in accordance with the transaction is fair, from a financial point of view, to the acreage holders.

Shareholder approval

The transaction requires the approval of at least 66% of the holders of the Subordinate Voting Shares, the proportional voting shares and the multiple voting shares of that square footage. In addition, pursuant to Regulation 61-101 respecting the Protection of Minority Securityholders in Special Transactions, the transaction must be approved by at least a majority of the unitholders of the subordinate voting shares, proportional voting and multiple voting shares, each separately as a class.

Certain directors and officers of Acreage have entered into voting and support agreements pursuant to which they have agreed to vote in favor of the transaction. The directors and officers of Acreage have also agreed to certain lock-up conditions with respect to their current holdings of Acreage securities.

Canopy Recommendation

Greenhill & Co. Canada Ltd. ("Greenhill") acted as financial advisor to Canopy Growth and provided the Board of Directors of Canopy Growth (the "Canopy Board") with an independent opinion on the fairness that the exchange ratio payable in Under the transaction is: fair, from a financial point of view, at Canopy Growth. Upon receipt of the Greenhill Fairness Opinion, the transaction and the amendments were unanimously approved by Canopy's Board of Directors, with the exception of directors who abstained from voting on the transactions. as a result of the changes. All board members support the transaction and the changes.

Canopy Shareholder Approval

The issuance of Canopy Shares as part of the transaction and certain amendments will require the approval of a simple majority of the Canopy Growth Disinterested Shareholders present at a special meeting ("the meeting"). of Canopy ").

Additional transaction conditions

The transaction is subject to, among other things, the approval of the CSE, the Toronto Stock Exchange and the New York Stock Exchange, the Supreme Court of British Columbia and certain other regulatory approvals and closing conditions. The Agreement contains representations, warranties and undertakings, including termination fees in the amount of US $ 150 million, payable by Acreage upon termination of the transaction in certain circumstances. The agreement also includes certain non-solicitation clauses, subject to Acreage's right to accept a superior proposal in certain circumstances, with Canopy Growth having a five-day right to match any superior proposal received. by Acreage.

Further details of the transaction and amendments will be provided to the shareholders of Canopy Growth and Acreage in information circulars that will be mailed to shareholders.

advisors

Cassels Brock & Blackwell LLP and Paul Hastings LLP acted as legal advisors to Canopy Growth. PricewaterhouseCoopers LLP (Canada) acted as financial advisor to Canopy Growth. Ernst & Young LLP (EY) acted as tax advisor to Canopy Growth. DLA Piper (Canada) LLP and Cozen O'Connor acted as counsel for Acreage. Canaccord Genuity Corp. acted as financial advisor to Acreage and INFOR Financial Inc. as a financial advisor to the Acreage Special Committee. Canaccord Genuity Corp. and INFOR Financial Inc. submitted an equity certificate to the Surface Board and the Surface Ad Hoc Committee, respectively. Stikeman Elliott LLP acted as legal advisor to the special committee on acreage.

About canopy growth

Canopy Growth is a diversified and leading cannabis and hemp company in the world, offering distinct brands and varieties of cannabis preserved as dried capsules, in oil and capsule form. Canopy Growth offers medically approved vaporizers through its subsidiary Storz & Bickel GMbH & Co. KG. From product innovation and process to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company, product, site and site. country at a time. Canopy Growth is present in more than a dozen countries on five continents.

Canopy Growth is proud to inform health practitioners, conduct in-depth clinical research, and increase public understanding of cannabis. Through its wholly-owned subsidiary, Canopy Health Innovations, it has dedicated millions of dollars to cutting-edge, marketable research and intellectual property development. Canopy Growth is working with the Beckley Foundation and has launched Beckley Canopy Therapeutics to research and develop clinically-validated cannabis-based medicines focused on protecting intellectual property. Canopy Growth acquired the assets of the hemp research company, ebbu, Inc. ("ebbu"). Advances in IP and R & D by the ebbu team are directly applicable to Canopy Growth's Cannabis Growth cannabis and marijuana cannabis breeding program beverages infused with cannabis. Canopy Growth, through its partially owned subsidiary, Canopy Rivers Inc., provides resources and investment to new entrants into the market and is a stable investment portfolio in the sector.

From our historic listing on the Toronto Stock Exchange and the New York Stock Exchange to our continued international expansion, the pride in advancing shareholder value through leadership is embedded in everything we do at home. Canopy Growth. Canopy Growth has partnered with industry figures such as cannabis icon Snoop Dogg, DNA Genetics crossover legends and Battelle's Green House, the world's largest nonprofit research and development organization, and the Fortune 500 alcohol leader, Constellation Brands, to name a few. Canopy Growth operates ten licensed cannabis production sites with a production capacity of over 4.4 million square feet, including more than 500,000 square feet of GMP certified production space. For more information, visit www.canopygrowth.com.

About the area

Headquartered in New York, Acreage is the largest vertically-integrated, multi-state US owner of cannabis licenses and assets in terms of the number of cannabis-licensed states in the world. according to information available to the public. Acreage holds operating licenses or has management service agreements with licensees to assist in operations in 20 states (including pending acquisitions) with a population of approximately $ 180 million. Americans, and a total addressable market estimated at more than $ 17 billion US cannabis sales, according to Arcview Market Research. Acreage is dedicated to building and scaling operations to create a seamless, consumer-focused cannabis experience. The Botanist, the national brand of Acreage retail stores, debuted in 2018.

Original press release

Posted by NCV Newswire

NCV Newswire of New Cannabis Ventures aims to provide high quality content and information on leading cannabis producing companies to help our readers filter noise and stay current on the most important news stories. cannabis. NCV Newswire is hand-crafted by an editor and is by no means automated. Do you have confidential advice? Get in touch.