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Canopy Growth announces exercise of acreage options paving the way for acquisition by Canopy USA

June 4, 2024  By Grow Opportunity Staff

(CNW) Smiths Falls, Ont. — Canopy Growth Corporation, a world-leading cannabis company dedicated to unleashing the power of cannabis to improve lives, announced today that the option to acquire all of the issued and outstanding Class E subordinate voting shares of Acreage Holdings, Inc. has been exercised in accordance with the terms of the arrangement agreement dated April 18, 2019, as amended, between Canopy Growth and Acreage.

In connection with the arrangement agreement dated as of October 24, 2022, by and among Canopy Growth, Canopy USA, LLC  and Acreage, as amended, in respect of the Class D subordinate voting shares of Acreage, on closing, Canopy USA will acquire all of the Fixed Shares and Floating Shares and Acreage will become a wholly-owned subsidiary of Canopy USA.

In addition, Canopy Growth announced today that it exercised its option, in part, to acquire certain outstanding debt of Acreage in connection with the option agreement dated November 15, 2022 among a wholly-owned subsidiary of Canopy Growth and the lenders party to Acreage’s credit agreement dated as of December 2021, as amended on October 24, 2022 and April 28, 2023.

Canopy Growth wishes to congratulate Canopy USA for completing its acquisition of 100% of two of the three companies in the Wana Brands portfolio, being all of the equity interests of Wana Wellness, LLC and The CIMA Group, LLC in addition to the acquisition of approximately 77% of the shares of Lemurian, Inc. on May 31, 2024. Canopy USA’s acquisition of Mountain High Products, LLC remains subject to regulatory approval and is expected to close in the first half of fiscal 2025. Wana Wellness, CIMA, and Jetty are now subsidiaries of Canopy USA.


Closing of the acquisition of Acreage remains subject to all of the closing conditions set forth in the Acreage Fixed Share Arrangement Agreement and the Acreage Floating Share Arrangement Agreement.

“These are major steps forward and consistent with the strategy outlined by Canopy Growth to allow our shareholders to benefit from our ownership of non-voting shares in Canopy USA, and we’re excited to see this advancing as more of Canopy USA’s priority markets come online for adult use across the Midwest and Northeast,” said David Klein, Chief Executive Officer of Canopy Growth, and member of the board of managers of Canopy USA. “With the acquisition of Jetty and two of the three Wana business units now complete, Canopy USA is demonstrating its executional capabilities, and we anticipate that these actions will drive growth and the realization of commercial synergies across Canopy USA’soperational platform.”

Debt Acquisition Terms

The Optionor entered into various agreements in connection with the Debt Acquisition in order to acquire approximately US$99.8 million of Acreage’s outstanding debt from certain Lenders in exchange for US$69.8 million in cash and the release of approximately US$30.1 million that was held in escrow pursuant to the Option Agreement. As reported in Canopy Growth’s Annual Report on Form 10-K for the year ended March 31, 2024, the Option Premium was not included in Canopy Growth’s cash and cash equivalents as of March 31, 2024.

The Optionor subsequently transferred approximately US$2.2 million of the Acquired Debt to the other Lender and entered into a series of agreements with the Rolling Lender whereby the Optionor acquired a call right over the Rolling Lender’s US$45.6 million remaining interest in Acreage’s debt. If the Optionor exercises the Call Right before September 15, 2024, the purchase price for the Rolling Interest will be equal to the amount of the Rolling Interest being acquired; however if the Optionor exercises the Call Right on or after September 15, 2024 and on or prior to January 14, 2025, the purchase price for the Rolling Interest will be 107.125% of the amount of the Rolling Interest being acquired; and if the Optionor exercises the Call Right on or after January 15, 2025, the purchase price for the Rolling Interest will be 114.25% of the amount of the Rolling Interest being acquired. The Optionor has also granted the Rolling Lender a put right in respect of the Rolling Interest exercisable on or after January 15, 2025 with a purchase price of 114.25% of the amount of the Rolling Interest subject to the put right.

The Optionor, the Rolling Lender and Acreage also entered into an amended and restated credit agreement in respect of the Acquired Debt, which provides for, among other things, certain interest payments to be paid-in-kind, revisions to certain financial covenants and, following certain events, a maturity date extension.

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