(Reuters) – Canadian Marijuana Producer Canopy Growth Corp is close to an agreement to buy US-based pot company Acreage Holdings, a source familiar with the case to Reuters Wednesday.
FILE PHOTO: A sign with Canopy Growth Corporation's logo depicted at their facility in Smiths Falls, Ontario, Canada, January 4, 2018. REUTERS / Chris Wattie / File Photo
The deal is expected to raise a premium of around 28 percent At Acreage's five-day average trading price – or about 25 percent on Wednesday's closing price, the source said.
The transaction could be announced as soon as Wednesday, the source said, but notified there is no certainty that the two parties will agree on any agreement.
The person asked not to be identified because the case is still confidential.
Cannabis companies in Canada have been raising money in their businesses to stave off competition and develop new products, especially after the country approved the use of recreational marijuana in October. They have also been looking for ways to enter the US market, where cannabis remains federally illegal.
Acreage was published on the Canadian securities market in November and holds licenses or agreements with holders in 19 US states while managing a chain of stores.
An agreement will give the Canopy rights to Acreage's products immediately and set up the two companies with an agreement to swap stock later on condition that marijuana becomes federally legal in the United States, the source added.
Based on the purchase agreement, Canopy was able to borrow part of their branding and intellectual property rights to enter the US market while helping Acreage grow, the source said.
Neither Acreage Holdings nor Canopy Growth responded immediately to requests for comment.
US stock quotes were up nearly 8 percent at $ 46.22 in extended trading.
Reporting of Harry Brumpton in New York and Aishwarya Venugopal in Bengaluru; editing of G Crosse