National Post (National Edition)
Canopy, Couche-tard deal has big potential
TORON TO • On the face of it, Canopy Growth Corp.’ s agreement with convenience-store operator Alimentation Couche-tard Inc. to open a single store in London, Ont. doesn’t exactly scream “big deal.”
But the tie-up could prove to be the most significant deal for Canopy since its US$4 billion investment from Constellation Brands — if it can leverage CoucheTard’s massive global footprint. Laval, Que.-based Couche-tard has a network of about 16,000 stores in North America, Europe, Asia, Latin America and the Middle East. That includes 7,800 convenience stores in the U.S., where it’s in every state except Utah and Nebraska.
Canopy chief executive officer Bruce Linton was uncharacteristically tightlipped about the CoucheTard tie-up, declining to comment on whether the London store will be a launchpad for a bigger partnership. “Canada is an excellent place to figure things out, but it’s not the primary place from which a company can be operating and be a globally relevant player,” he said in an interview.
Couche-tard said in September, one month before Canada legalized recreational pot, that it was interested in the cannabis market. “We’d rather be part of that solution, part of that journey, than sit on the sidelines and wait too long,” CEO Brian Hannasch told BNN Bloomberg TV.
Tilray Inc. also hopped on the deal train last week with plans to acquire hempfood manufacturer Manitoba Harvest for up to $419 million, its first foray into the food industry. Much like Couche-tard, Manitoba Harvest brings a large distribution network to the deal. The company sells its products at more than 13,000 points of sale across the U.S., including Walmart, Costco, CVS, Kroger, Whole Foods and Amazon, potentially opening the door to mainstream sales of new CBD products down the road.
Canopy has accomplished many firsts in this industry, including the first pot company to go public and the first to hit $1 billion in market value. It may have its sights on another first, whether it’s the first cannabis bond or the first spinoff of a cannabis REIT.
Linton said the company wants to leverage its tangible assets, which he values at a “couple billion dollars,” and is considering everything from issuing bonds to mortgaging its properties to spinning them off into a real estate investment trust.
“I do not wish to continue to be complemented on the extraordinarily clean balance sheet I have,” he said. “It’s not an efficient use of assets.”
Cannabis companies have only just started tapping the debt markets, and none of them has issued a straight bond. Canopy raised $600 million in a convertible bond sale last June.
Meanwhile, there is no shortage of optimistic forecasts about how big this industry is going to get, but a note last week from Seaport Global Securities may take the cake. Analyst Brett Hundley expects the global cannabis market to approach US$630 billion by 2040 from US$12 billion today, with the U.S. market amounting to almost US$95 billion and the U.S. CBD market alone reaching US$24 billion.