German acquisition lifts Ontario pot producer

TORONTO • Canadian marijuana producer Canopy Growth Corp. is solidifying its international growth agenda with its all-stock acquisition of German-based MedCann, giving it a distribution network in Europe’s largest economy.

MedCann has navigated the complex regulatory environment for import and distribution, putting Tweedbranded cannabis strains into pharmacies in Germany — where the burgeoning industry relies on imports. Germany legalized access to medical cannabis in 2005, but no domestic production currently exists.

The purchase, announced Monday and subject to approvals, will be made with Canopy shares, which on Friday closed at $10.60 in Toronto. At that value, the transaction would be worth about $7.2 million upon closing.

The MedCann deal helped boost Canopy Growth shares 62 cents, or 5.8 per cent, to $11.22 on Monday.

Canopy would also pay up to 490,000 shares over two years if certain performance targets are achieved, bringing the total number of shares to be issued to about 1.16 million — one per cent of Canopy’s current common shares.

Canopy Growth currently has a market value of about $1.2 billion, based on Friday’s stock price.

“Germany has begun a process of enabling medical access to cannabis and through a policy that recognized Canopy as the first legal supply source from North America,” Bruce Linton, chairman and CEO of Canopy Growth, said in a statement. “This acquisition establishes a distinct and purely medicinal corporate entity that helps us today but also positions us for domestic medicinal production inside Germany if the regulatory environment shifts.”

The deal gives Canopy Growth, based in Smiths Falls, Ont., another market in which to sell its excess inventory, along with its recently announced export deal to Brazil. The company will export its Tweed-branded strains but not Bedrocan Canada products due to licence restrictions.