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CIBC enters cannabis market with Canopy Rivers

$60M private placement for venture arm

- Mark rendell

The investment banking arm of the Canadian Imperial Bank of Commerce appears set to enter the cannabis market, with CIBC World Markets Inc. agreeing to help underwrite a $60 million private placement for Canopy Rivers Corp.

On Wednesday, Canopy Rivers, a partly-owned subsidiary of Canopy Growth Corp. that focuses on investing in the cannabis space, announced its intention to go public through the reverse takeover of a

WE HAVE THE BENEFIT OF BEING ABLE TO CO-INVEST.

shell company in the coming weeks. CIBC’s investment bankers will be co-leading the accompanyi­ng financing alongside GMP Securities L.P. and Eight Capital, Canopy Rivers said.

It’s the first time CIBC investment bankers have been directly involved with cannabis financing.

The deal will make CIBC the second of the Big Five banks to help underwrite companies in the marijuana sector.

Billions of dollars has flooded into public Canadian cannabis companies over the past three years, but almost all the underwriti­ng fees have gone to investment banks like Canaccord Genuity Corp. and GMP Securities.

That began to change in January when BMO Capital Markets co-led a $200 million bought deal for Canopy Growth.

BMO has since participat­ed in two more financings: a $100 million bought deal for Cronos Group Inc. in March, and a $100 million bought deal for Cannabis Wheaton Income Corp. in May.

“The involvemen­t of BMO in Canopy Growth financing at the end of January was probably a hint that the rest of the banks would soon follow,” said Daniel Pearlstein, executive vice president and head of business developmen­t for Canopy Rivers.

Ahead of the reverse takeover, Canopy Rivers appointed a new board of directors, which includes Canopy Growth’s chief executive Bruce Linton as chairman and CEO, as well as Joe Mimran, founder of fashion brands Club Monaco and Joe Fresh, and Richard Mavrinac, former chief financial officer of Loblaw Companies Ltd. and George Weston Limited.

Despite sharing a chief executive, and despite Canopy Growth owning a 30 per cent stake in Canopy Rivers, the companies will remain separate, said Pearlstein

“Rivers will be working for Rivers first. But we have the benefit of being able to co-invest or bring in Canopy Growth as partners,” said Pearlstein.

“We’re essentiall­y the corporate venture capital arm of Canopy Growth.”

So far, the company has invested primarily in smaller Canadian cannabis cultivator­s, using royalty-based financing, where Canopy Rivers provides up-front capital in return for a portion of the company’s future revenues. But Pearlstein says the company is broadening its investment approach.

“If a company wants to work in convertibl­e debt, we can do that.

“If they want to weight it more towards the royalty, then we can do that, and if they’re interested in only an equity portion, we can do that too. And then there’s some unique joint ventures that Canopy Rivers has structured on behalf of Canopy Growth,” said Pearlstein.

He added that Canopy Rivers was intending to invest in different parts of the value chain beyond cultivatio­n, and was looking at both domestic and internatio­nal markets.

When asked to comment on the financing, a CIBC spokespers­on said they had “nothing further to offer on our side.”

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