Canadian alcohol company, owners of Corona, put money into marijuana

16 August, 2018, 21:22 | Author: Billie Castillo
  • A man smokes weed

The investment follows a deal past year that saw Constellation acquire a almost 10 per cent stake in Canopy for $245 million.

Makers of alcoholic beverages are looking to cash in on the growing use of cannabis around the world as their traditional business slows.

Notably, several marijuana drinks are already available in Colorado. But in as nascent an industry as cannabis, shares took a 5% hit on Tuesday when the province of Ontario, home of Canada's largest city, said it would delay the roll out of private retail stores.

Canopy Growth was founded in 2013 and has a presence in 11 countries.

Other well-known breweries like Blue Moon Brewery and Lagunitas Brewing are also entering the cannabis space.

"Constellation gets it. This is happening globally", Linton told Quest, adding that Constellation can benefit by being the first to market with cannabis-based drinks while other beer and alcohol companies are still trying to figure out what to do in the market.

Canopy, based in Smiths Falls, Ontario, doesn't now have any operations south of the border, where marijuana is banned federally.

Toronto-listed Canopy shares rose as much as 35 percent and were up 28 percent at C$41.17 at 10:18 am ET (1418 GMT), the highest level since June, and lifted shares of its peers. Speaking of ventures, Canopy has a venture arm called Canopy Rivers that it has modeled after similar units at Alphabet (GOOGL), with plans to bring the cannabis venture unit public on the TSX venture exchange later this year.

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But both companies said they have no plans to sell cannabis products in any market unless it is permitted at all applicable government levels. In the US, a patchwork of state laws and gentle enforcement under the Obama administration have made its pungent odor common from Colorado ski towns to the sidewalks of NY.

"This is really rocket fuel", Bruce Linton, Canopy's chairman, told analysts.

Canopy, which has a presence in 11 markets around the world, said it would make global growth a priority.

Shares of the Canadian company surged more than 22% in trading Wednesday after Canopy announced Constellation Brands - the $42 billion company behind Corona - had upped its investment in the marijuana grower by $4 billion and now owns a 38% stake.

"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", said Rob Sands, chief executive of Constellation.

Canopy's target acquisition list exceeds $1 billion for global assets and non-cultivation assets in Canada, Linton said.

Also on Wednesday, Canopy reported a net loss $91-million, or 40 cents a share for its fiscal first quarter of 2019, as it made large investments ahead of Canadian legalization. Constellation will also receive 139.7 million new warrants which are exercisable over the next 3 years, and should it choose to exercise them, it would become a majority stakeholder in the cannabis company.

The company announced on Tuesday that it has issued C$2,500,000 in common shares of Canopy Growth in connection with the expansion of an existing commercial arrangement.

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