Beer company Constellation Brands said Wednesday it will top off its investment in cannabis company Canopy Growth by boosting its share ownership stake to about 38 percent, an infusion of cash Canopy said would allow further global expansion.
Constellation, one of the largest beer companies in the world, will buy 104.5 million more shares in the Canadian marijuana company at $48.60 per share Canadian, an investment of more than $5 billion Canadian, or about $4 billion U.S., the companies said. The purchase is at a 51.2 percent premium to the stock’s closing price Tuesday on the Toronto Stock Exchange. The move also came with an option to purchase more stock at a set price that could result in an additional $4.5 billion investment – which could eventually give the beer company a majority stake.
“This is really rocket fuel, it does add quite a lot,” Canopy Growth CEO Bruce Linton said in a conference call Wednesday morning. “You know as we look around the world, we’re going to be expanding production, we’re going to be doing more research, we’re going to develop more intellectual property, we’re going to create more leading brands, we’re going have more products and we’re going to be way more global…. This is about growth around the globe.”
Victor, N.Y.-based Constellation, the company that distributes Corona Beer in the United States, had already acquired a nearly 10 percent stake in the company for about $245 million last October.
The big take-away from Wednesday’s announcement it’s boosting that stake: Constellation is sending a strong signal of the upside potential for the cannabis industry.
It also establishes that Canopy Growth is the cannabis platform for Constellation, the companies said.
“Through this investment, we are selecting Canopy Growth as our exclusive global cannabis partner,” said Rob Sands, Chief Executive Officer of Constellation Brands. “Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space. We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space.“
Sands said the investment is the largest to date by any company in the cannabis business.
Canopy Growth was already one of the major leaders in the cannabis market in North America, and earlier drew attention by becoming the first company that produces cannabis to be traded on the New York Stock Exchange.
“Our business can now make the strategic investments required to accelerate our market position globally,” said Linton. “Constellation’s concentration of global cannabis activities exclusively through Canopy, coupled with the investment and its expert capabilities in brand-building, marketing, consumer insights and M&A will be a huge benefit as we look to expand our portfolio in Canada, the United States and emerging cannabis markets around the globe.”
Canopy Growth, and its subsidiaries Tweed and Spectrum Cannabis, already have a presence in 11 countries, having announced recently the company was expanding to Africa, starting a partnership with a company in Lesotho, aimed at entering the market in neighboring South Africa.
Canopy Growth also announced Wednesday that it had 1Q revenue of $25.9 million representing a 63% increase over the quarter ended June 30, 2017 and a 14% increase over revenues of $22.8 million in the fourth quarter of fiscal 2018.