Raymond James Canopy Growth (WEED.TO)(CGC) is aiming to dominate the cannabis gummies market with its most recent option-based agreement to purchase Colorado-based edibles manufacturer Wana Brands.
Canopy has sealed the deal, acquiring 100 percent of the firm from three Wana owner entities. Canopy plans to make an upfront cash payment of $297.5 million, according to the agreement. When each Wana entity's rights to purchase are exercised, Canopy Growth claims it will make a payment equal to 15% of the fair market value in cash, shares, or a combination of both at its discretion. The company did not give an estimate for the whole amount expected by the transaction.
This purchase confirms Canopy has set its sights on US expansion with Canopy Growth CEO David Klein stating "Wana secures another major, direct pathway into the U.S. THC market upon federal permissibility, and in Canada we'll be adding the top-ranked cannabinoid gummies to our industry-leading house of brands."
In the United States, large marketplaces like Nasdaq and NYSE do not allow companies listed on those exchanges to directly own plant-touching cannabis assets while the drug is still federally prohibited. The firm also has a conditional ownership stake in TerrAscend (TER.CN), which operates in several US states.
Wana is a California-based edibles company that says it has the "largest distribution" in North America. The firm sells gummies and other cannabis-infused goods in 12 states and 9 Canadian markets, according to its website. Wana aims to expand to 20 states by the end of 2022. In surveyed US states, gummies account for 71% of all edibles purchased.
Wana has an agreement with London, Ontario-based edibles maker Indiva (NDVA.V). In February, those firms extended their agreement for another five years, which may be extended for three additional five-year periods. Rahul Sarugaser of Raymond James believes Indiva's roughly 50% stake in Canada's legal cannabis edibles market is “an M&A target if we've ever seen one,”.