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Canopy Growth Could Be on the Cusp of Making A Huge BUT ON U.S. Marijuana Legalization – The Motley Fool



You might call it "Coming to America Part II."

Bloomberg and CNBC reported Wednesday that the Canadian Marijuana Producer Canopy Growth (NYSE: CGC) is in talks to acquire US -based cannabis operator Acreage Holdings (NASDAQOTH: ACRGF) . Both news organizations stated that Canopy's "familiar with the matter" is close to making a deal to buy Acreage. [4659002] Canopy Growth announced in January that it plans to invest between $ 100 million and $ 150 million to build a large-scale plant for the production of kennels in New York state But the possibility that the company could soon acquire Acreage Holdings means Canopy could be at the forefront of making a huge bet on U.S. It's not surprising that Canopy Growth may be interested in Acreage Holdings.

The company ranks as the largest vertically integrated, multi-state owner of cannabis licenses and assets in the U.S. Based on the number of states in which it holds licenses.

That total number of states currently stands at 1

9 including Acreage's pending acquisitions. And those states include several of the largest cannabis markets in the U.S. Arcview Market Research estimates that the total addressable market in the states where Acreage owns licenses will grow to $ 14 billion by 2022.

Acreage announced the addition of a significant asset in December with the acquisition of Form Factor, multi-state manufacturer and a distributor of cannabis-based edibles and beverages. Acreage CEO Kevin Murphy said at the time that the deal put his company "is a direct path to becoming the Procter & Gamble of cannabis."

If Canopy Growth does buy Acreage Holdings, it would also gain some impressive political connections. Former U.S. House Speaker John Boehner and former Canadian Prime Minister Brian Mulroney serve on Acreage's board of directors.

Why it's a big bet on marihuana legalization

There is one major wrinkle with the potential acquisition of Acreage Holdings by Canopy Growth. As long as the marihuana remains illegal at the federal level in the US, Canopy can not operate in the U.S. (19659002) This was not a problem with Canopy's Growth's move to build a hemp production facility in New York.

However, should Canopy Growth buy Acreage Holdings and actively run out of the Canopy Growth the company, it would be in violation of the NYSE and TSX listing requirements. So how can Canopy acquire Acreage? One scenario is that the company could buy Acreage in a way where its ownership does not become active until U.S. legalizes marijuana at the federal level.

Taking this approach would probably not make much sense if changes to U.S. marijuana laws were not likelihood in the not-too-distant future. But bipartisan legislation is making its way through the U.S. Congress to revise federal marihuana laws. There is a real chance that the legalization of marijuana in the U.S. could be on the way relatively soon. A multibillion dollar acquisition of Acreage by Canopy would be a big roll of the dice that this could happen.

What's next

CNBC's sources said Canopy Growth and Acreage Holdings were talking Wednesday evening to finalize a deal. Bloomberg reported that the deal could be announced as soon as this week.

As for the bill to change the federal marihuana laws in the U.S., the prospects for passage look very good in the Democratic-controlled House of Representatives. There are more hurdles in the Senate, but political pressure can be raised for the bill to be brought up for a vote. If that happens, Sen. Cory Gardner (R.-Colo.), A sponsor of the law, thinks that there will be enough votes to pass it and that President Trump will sign the Bill on the law.

We should know soon if Canopy Growth is really making A big bet is in the US The legalization of a marihuana, but it may take several months to know if that bet will have a quick payoff.


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