The 6 Largest Marijuana Story Transactions – The Fool Motley

The legal marijuana industry is being born before our eyes, the greatest achievement of its existence being last Wednesday, when recreational cannabis was officially legalized. Depending on the province, adults aged 18 to 19 years and older are free to buy up to 30 grams of dried flowers.

Now that this adult weed is legal, Wall Street is looking for the industry to generate about $ 5 billion in additional annual sales when it is fully operational. This expected increase in sales and the potential for significant profits have led investors to accumulate pot stocks since the beginning of 2016. In many cases, the world's largest stocks of marijuana, by market capitalization, have seen their catapulted courses increase by more than 1,000% since 2016 has begun.

But it's not just investors who are interested in marijuana stocks. The prospect of losing market share has forced many transactions into the cannabis space in recent months. In fact, all the most important transactions in the history of marijuana have occurred since March. Listed in ascending order, here are the six largest transactions in the pot business.

5. and 6. (Tied.) Canopy Growth Corp. buys $ 325 million worth of hemp Ebbu and Aphria buys $ 325 million from Nuuvera

The fifth and sixth largest deals of all time are tied at $ 425 million Canadian ($ 325 million) each.

The first agreement, concluded in March, concerned Aphria (NASDAQOTH: APHQF) acquisition of Nuuvera. This much-criticized acquisition, which was significantly larger at the initial announcement, eventually contracted at only $ 325 million due to the low cash component and the transaction-related share. (Aphria shares struggled in the first half). It is interesting to note that Nuuvera did not increase the maximum production potential of Aphria, which most growers look for in acquisitions.

Instead, Aphria has essentially acquired Nuuvera's international infrastructure, giving it access to a dozen foreign markets. These foreign channels are expected to play an important role in selling the national excess supply in 2020 and beyond.

Then a few days ago, Canopy Growth Corp. (NYSE: CGC) announced the acquisition of US hemp producer Ebbu Hemp for $ 325 million. This includes a small cash portion of C $ 25 million and the remainder in Canopy common shares.

The market is really excited about this deal, knowing that Canopy Growth is moving into the somewhat cloudy, but potentially lucrative, US market. However, with the optimization of the hemp perspective in the United States, this seems to be a logical use of the huge cash flow of Canopy Growth. Hemp is usually rich in cannabidiol, the cannabinoid best known for its apparent medical benefits.

Considering that the agreement on the purchase of Ebbu with Canopy Growth contains a significant component in shares and that it is not yet closed, this tie for fifth place will probably be broken in one way or another very soon.

4. MedMen Enterprises Acquires PharmaCann for $ 682 Million

The largest US acquisition of history was announced just nine days ago by a specialist retailer MedMen companies (NASDAQOTH: MMNFF). MedMen has agreed to purchase PharmaCann, a retailer and private producer, in a $ 682 million equity transaction.

The agreement is expected to complement MedMen's US addressable market and quickly facilitate its strategy of extending its commercial footprint. Since the US federal government does not allow cross-border cannabis transportation, the acquisition of MedMen will quickly add eight growing facilities in seven states – and was not present in six of them in the past. In addition, it recovers 18 points of sale and new sales licenses. In other words, with MedMen aiming to establish its retail sites as an inescapable cannabis experience, this transaction makes a lot of sense.

Keep in mind that MedMen is a very busy bee in the expansion department and that opening new locations will not be done cheaply nor will it be done overnight. That being said, expect the company to continue to report losses despite rapid revenue growth in the immediate future.

3. Aurora Cannabis buys CanniMed Therapeutics for $ 852 million

The first really massive deal in the world of cannabis has been signed. Aurora Cannabis (NASDAQOTH: ACBFF), which in May, completed the $ 852 million (approximately $ 1.1 billion) acquisition of CanniMed Therapeutics of Saskatchewan.

In November of last year, when Aurora proposed for the first time to buy CanniMed, it seemed like an agreement was far away. CanniMed 's board of directors was clearly opposed to the suit, fearing that Aurora would not support production in Saskatchewan and felt that CanniMed was significantly undervalued, based on the fact that CanniMed' s business was undervalued. initial offer of Aurora. Of course, the commitment to maintain production in Saskatchewan, with a premium of 181% over its mid-November price before the start of negotiations, was enough to influence CanniMed's board.

What got Aurora for her purchase? In addition to an increase in the number of registered patients and an increase in the production of dried flowers, CanniMed brings a production of high-margin cannabis oil. CanniMed was already working on an installation capable of producing 720,000 liters of oil per year, and Aurora could very well use this product to meet the needs of the medical community both at home and abroad.

2. Aurora Cannabis Acquires MedReleaf for $ 2.5 Billion

Interestingly enough, at one time Aurora Cannabis occupied the two largest marijuana transactions in history. In July, it finalized the purchase of MedReleaf, an Ontario company, in a $ 2.5 billion all-stock deal.

Why MedReleaf? The simple answer is that it has helped Aurora Cannabis to quickly increase its maximum production potential. The expansion of MedReleaf's Bradford facility will bring annual production to approximately 35,000 kilograms. But it 's MedReleaf' s acquisition of 164 acres of land that really did the business.

This land contained the Exeter facility, used for growing vegetables. This existing greenhouse is being modernized to grow cannabis. Once completed, it could produce 105,000 kilograms a year. This is a maximum annual production potential of 140,000 kilograms that Aurora has managed to engulf, thus bringing its own maximum capacity to about 570,000 kilograms of weeds per year.

MedReleaf has also been very focused on high quality cannabis strains and oils. As mentioned, Aurora is interested in the medical world at home and abroad. With less chance of trivialization – medical patients represent a smaller pool of consumers than the leisure market – priority given to Aurora by patients treated with marijuana for medical purposes and alternative consumption options such as oils should be result in higher operating margins. As such, the acquisition complemented Aurora's existing strategy, even though it was exceptionally expensive and dilutive for its shareholders.

1. Constellation Brands Acquires $ 3.8 Billion in Canopy Growth

However, the biggest market in the history of marijuana goes to Modelo and Corona brewers Constellation Brands (NYSE: STZ), which announced on August 15, 2018 the acquisition of nearly 104.5 million shares of Canopy Growth for $ 3.8 billion, a premium of more than 50% over the closing price of Canopy on August 14th. This transaction brings Constellation's participation in Canopy to 38%.

Most investors may not realize that this is the third investment of this type in Canopy Growth. In October 2017, Constellation took a 9.9% stake in the company for an amount of about $ 190 million. This investment has been appreciated many times since October.

Then, in June, Constellation bought one-third of Canopy Growth's $ 600 million convertible note portfolio. Convertible Notes may, as the name implies, be converted to Common Shares if the holder so chooses. In addition to the 139.7 million warrants that Constellation also received with its last contract, it has the opportunity to increase its stake in Canopy to more than 50%.

The reason Constellation Brands has been so aggressive is simple: Alcohol sales are low in North America. The opportunity to work with Canopy Growth to develop new alternative products, including non-alcoholic cannabidiol-based beverages, is expected to go a long way toward getting both companies to move their needles.

However, the investment of more than $ 4 billion of Constellation in Canopy also offers a pretty clear message: she sees a bright future for legal cannabis. Although the takeover of Canopy is unlikely for at least two years, since the Constellation Board of Directors retains limited weight on its financial leverage, Constellation Brands could very well engulf the rest of Canopy that it does not already have in 2021 or shortly thereafter. .