Canopy Growth Constellation Brands Deal
Canopy Growth Constellation Brands Deal

Constellation Brands, Inc. (NYSE: STZ) Acquires 9.9% Stake In Canopy Growth Corporation (OTC Pink: TWMJF) (TSX: WEED)

Constellation Brands, Inc. (NYSE: STZ) is best known for being the owner of coveted alcohol brands, such as Corona, Modelo, Robert Mondavi and SVEDKA. However, the company recently made headlines when it announced that it has acquired a 9.9% stake in Canadian cannabis giant, Canopy Growth Corporation (OTC Pink: TWMJF) (TSX: WEED) for $191 million (CAD$245 million). The deal gives Canopy Growth Corporation a value of around $1.95 billion (CAD$2.5 billion).

After watching the emerging cannabis industry’s massive growth across North America, Constellation Brands, Inc. acquires a minority stake in one of the largest and most respected medical marijuana companies. Considering alcohol sales and demand are slowing, the move to diversify into recreational and medical marijuana seems like a natural fit. However, Constellation Brands says it will not plan to market any cannabis-based products to any markets until it is fully legalized across “all government levels.”

“Our company’s success is the result of our focus on identifying early-stage consumer trends, and this is another step in that direction,” stated Rob Sands, CEO of Constellation Brands. The two companies will partner to develop cannabis-based beverages, most likely alcohol-based. While cannabis-based beverages may not be legal during the first phase of recreational legalization in Canada, the products will be allowed over time.

Analysts and investors saw the announcement as a major game-changing event for Canopy Growth and the industry overall. Beacon Securities analyst, Vahan Ajamian released a positive note on the deal and increased his target price for Canopy Growth to CAD$17 from CAD$14. “We suspect more alcohol companies may look to accelerate plans to enter the industry, as well as pharmaceutical and tobacco companies,” further detailed Ajamian.

Canopy Growth’s Canadian and U.S. listing jumped 19% and 19.16%, respectively on the news on the acquisition. Other cannabis companies across North America jumped on overall strong volume, as the industry is optimistic for a wave of similar investments.

 

Disclosure: News purposes only, no business relationship or investments in any company mentioned.

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Matt Rego

Matt is the Founder and CEO of Spotlight Growth, a full service investor relations and awareness service provider. Prior to launching Spotlight Growth, Matt worked six years within the investor relations industry, most recently serving as Vice President of Sales and Marketing at Global Discovery Group, Inc. In addition, Matt has been a financial writer and analyst since 2010 and investing in the stock market since 2007. Articles and content have appeared on well-known financial websites, such as: Investopedia, Google Finance, Yahoo Finance, ValueWalk, Minyanville, Seeking Alpha, CBS MoneyWatch, Investment Underground, Emerging Growth, Blasting News, GenYWealth, and more. In addition, Matt has received an honorable mention in Barrons’ and the New York Post. Matt graduated from the University of Minnesota with a Bachelor’s Degree in Finance.