Welcome to America: Canopy Growth Purchases Acreage Holdings – Acreage Holdings, Inc. (OTCMKTS: ACRGF) Summary Canopy Growth (NYSE: CGC) has announced an agreement that entitles the company to purchase Acreage Holdings (OTCQX: ACRGF) reaches legal consent. On a larger stock exchange can not operate in businesses that break federal laws. Area sells cannabis in the United States, which remains federally illegal. Canopy therefore does not buy Acreage Holdings today. Instead, the terms of the agreement give Canopy both the right and the obligation to purchase Acreage Holdings when it is legal. Canopy will therefore not own Acreage Holdings today, but will own Aker in the future. This deal is win-win: Canopy gets the chance to grow its brand and sell brands in the largest cannabis market in the world. Meanwhile, Acreage Holdings gets a cash inflow, which is important before or unless the SAFE Banking Act or STATES Act gives US cannabis companies better access to capital. Investors in the area will also receive a 22% premium over Wednesday's closing price and support to the world's largest and richest cannabis company. Parties Canopy Growth is the world's largest cannabis company. Headed by CEO Bruce Linton, Canopy has consistently performed among the best performances in the new cannabis industry. Thanks to strong implementation, Canopy secured the first and largest multi-billion dollar investment from a non-cannabis company Constellation Brands (STZ), the first Canadian cannabis company in Canada to announce an entry into the US hemp market and commands the largest market share in the nascent Canadian recreational market for cannabis. Because of these successes, Canopy is deserving the title of the valuable cannabis company in the world, with a business value of about $ 18 billion. Source: Acreage Holdings Fourth Quarter Earnings Presentation Acreage Holdings is a multi-state operator in the United States that has 25 cannabis dispensaries and 87 dispensary licenses. I cover Acreage Holdings at Growth Operation and has often liked the business and especially admired for some of its acquisitions which I thought were attractively priced. Acreage's latest quarterly earnings include U $ 10.5 million in revenue of 42% gross margins, with U $ 22.9 million in pro forma revenue. Net income is not one of the most important categories in the cannabis firm's earnings, due to the esoteric way Canada's accounting standards work for cannabis companies, but Acreage lost an eye for $ 217.6 million last year, or U $ 2.63 / share. [19659010] Acreage's cash expenses (U $ 202 million deployed last year) and Canopy Growth's deep pockets (C $ 4.1 billion in cash) mean that pairing here can be mutually beneficial. The problem The problem with such interconnection is that cannabis is federally illegal in the United States. As a result, listed companies on larger stock exchanges cannot own US cannabis companies, and US cannabis companies are referred to the Canadian Securities Exchange, a smaller Canadian exchange willing to accept state legal entities that run illegal federal business. 19659010] Acreage Holdings is one of the companies that act as ACRG.U (with the U suffix indicating it trades in US dollars) on the Canadian securities exchange. The solution Canopy Growth's solution to this problem is relatively simple: they will buy an irrevocable right and duty to purchase 100% of Acreage Holdings. "Canopy Growth Corporation and Acreage Holdings, Inc. are pleased to announce that they have entered into a final contract that gives Canopy Growth the right to acquire 100 percent of the shares in Acreage, with a requirement to do so as soon as cannabis production and sale becomes federally legal in the US, s ubject to obtain the necessary pre-approval of the shareholders of each of the stock and canopy production, as well as the approval of the Supreme Court of British Columbia. Following the approval of Canopy Growth and Acreage shareholders and Supreme British Columbia, according to terms of the agreement, Acreage Holders (as defined below) will receive an immediate aggregate total of US $ 300 million or approximately US $ 2.55 per share subordinate vote based on the currently outstanding subordinate voting rights and conversion of certain convertible securities described In addition, in exercising the Conservatives, holders of underlying voting shares in Acreag e receive 0.5818 of a common share of Canopy Growth for each limited liability shareholding held at the time of termination of the Transaction. On exercise of the Court, the total amount paid according to the Transaction is valued at approximately $ 3.4 billion on a fully diluted basis, a premium of 41.7% over the 30-day volume-weighted average price of the subordinated stock-related share of the Canadian Securities Exchange ends on April 16 2019 (based on the stock market quotient, premium premium and the 30-day volume-weighted average price of Canopy shares as of April 16, 2019). " Canopy Growth Press Release, April 18, 2019 If the agreement is approved by shareholders and corporations, the shareholders will receive U 2.55 per share immediately, and their shareholdings will convert to Canopy Growth shares with a share of 0 , 5818 shares in shares per Canopy Growth share when it becomes legal to complete the transaction. Effectively, this means that stock prices will be linked to Canopy prices and vice versa. Given closing price on April 17, Canopy & # 39; s price offer reflects a 22% premium to Acreage's price of $ 22.49. Thoughts This deal is win-win. The biggest problem for MSOs like Acreage Holdings is that they have Limited access to capital An agreement with Canopy Growth will eliminate these issues, giving Canopy Growths $ 4.1 billion in cash as of December 31. Accessing that capital will allow Acreage Holdings to expand much faster, buying licenses in several states and Build up their footprint faster than competitors. Meanwhile, Canopy Growth can expand its brands – such as Tokyo Smoke and Tweed – in the US even before it is federally allowed to operate in the country. Canopy Growth will eventually get a network of stores that already sell Canopy-branded products in Canopy-branded stores on the day the US laws change. Again, Canopy Growth has demonstrated its ability to be the first to execute deals among Canadian licensed manufacturers and their ability to execute contracts without leaks or rumors: This agreement was unfamiliar to the public after the market hour on Wednesday and was announced Thursday morning. For some of this size, it is remarkable how few leaks of Canopy Growth allowed and how quickly Canopy Growth was able to announce the deal from these leaks. In my opinion, Canopy Growth's performance is unmatched in the Canadian cannabis sector, and this deal is just another example. This agreement will also encourage other Canadian LPs, and possibly even industrial outsiders, to look into acquiring US-based cannabis companies. Other MSOs like Green Thumb Holdings (OTCQX: GTBIF), Curaleaf (OTCPK: CURLF), Harvest Health (OTCQX: HRVSF) are all about news about Canopy's purchases, as each one can find more potential acquirers and investors . 19659029] Growth: Helping Investors Make Smart Investments in the Booming Cannabis Sector We are the largest community of cannabis investors in Seeking Alpha. We have recently launched in-depth comparisons by both Canadian LPs and US multi-state investors for investors interested in this fast-growing sector. Join us to get daily cannabis news exclusive access to my cannabis portfolio excluding thorough coverage including coverage of Acreage Holdings Charlotte's Web CannTrust Cansotium


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