Cannabis stocks rallied on Thursday before paring their gains, after news that the biggest company in the sector by market cap has bought the rights to acquire a U.S. multistate operator as soon as the federal ban on cannabis has been lifted.
Canada’s Canopy Growth Corp., with its $4 billion treasure chest courtesy of an investment from Corona beer distributor Constellation Brands Inc. STZ, +3.77% said it has bought the rights to acquire New York-based Acreage Holdings as soon as cannabis has been fully legalized in the U.S. in a mostly stock deal.
“Today we announce a complex transaction with a simple objective,” Canopy Chief Executive Bruce Linton said in a statement. “Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists.”
Canopy shares soared more than 8% after it confirmed the deal, which MarketWatch reported on late Wednesday. Once the rights have been exercised, the deal will be valued at $3.4 billion, a 41.7% premium over the 30-day volume weighted average price of the Acreage subordinate voting shares on the CSE ending April 16, Canopy said in a statement.
The companies will also enter a licensing deal that would grant Acreage access to some of Canopy’s well-known brands, including Tweed and Tokyo Smoke, along with other intellectual property.
Canopy CGC, +3.99% , WEED, +4.43% is the most highly valued company in the cannabis sector with a market cap of more than $15 billion. The company cannot outright buy a U.S. company for now, because it would run afoul of the rules for the Toronto Stock Exchange, where its shares are listed. The TSX doesn’t allow companies to own stakes in businesses that run illegal operations, which New York-based Acreage technically does because marijuana is still federally illegal in the