Canopy Growth Soars 29% as Constellation Brands Makes $3.8 Bln Strategic Investment in Company

Shares of Canopy Growth (CGC) surged by 29% intraday after the company and Constellation Brands (STZ) said Wednesday that they expanded their strategic partnership in a bid to position Canopy Growth as a global leader in cannabis production, branding, intellectual property and retailing.

The alcoholic beverage company said that it will raise its ownership interest in Canopy Growth by acquiring 104.5 million shares directly from Canopy Growth, thereby achieving approximately 38% ownership when exercising the existing Constellation warrants.

It also said that it is acquiring the new shares at a price of CAD48.60 ($37.09) per share, which is a 37.9% premium to Canopy’s 5-day volume weighted average price of the common shares on the Toronto Stock Exchange and a 51.2% premium to the closing price on Aug. 14.

Upon closing of the transaction, Canopy Growth will have proceeds of about CAD5 billion. The medical marijuana company will use the fund to strategically build and/or acquire key assets needed to establish global scale in the nearly 30 countries pursuing a federally permissible medical cannabis program, while also rapidly laying the global foundation needed for new recreational cannabis markets.

Constellation said that it expects the transaction to be accretive to the company’s full-year diluted earnings per share in fiscal 2021. It also said that it will nominate four directors to Canopy Growth’s seven-member board.