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Constellation pumps $4 billion into cannabis business

US drinks group Constellation Brands has poured an additional US$4 billion into Canadian cannabis producer Canopy Growth Corporation – the largest investment in the cannabis industry to date.

Constellation Brands has significantly upped its position in the cannabis sector

Constellation Brands acquired a minority stake in Canopy last year for US$191m, announcing its intention to create cannabis-infused drinks.

This latest transaction, which is subject to shareholder and regulatory approval, will increase Constellation’s ownership to 38%.

The investment is said to be the “largest to date in the cannabis space”. It will allow Canopy to build or acquire “key assets” to grow its presence in almost 30 countries seeking federal legalisation of medicinal cannabis use and also “lay the global foundation” for recreational cannabis use.

The US in particular is viewed as a strategic priority “requiring significant capital”. However, both companies only plan to sell cannabis products in countries where the drug is legal at all “applicable government levels” – and currently, cannabis use is not federally permitted in the US.

“Through this investment, we are selecting Canopy Growth as our exclusive global cannabis partner,” said Rob Sands, CEO of Constellation Brands.

“Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space.

“We look forward to supporting Canopy as they extend their recognised global leadership position in the medical and recreational cannabis space.”

Founded in 2013, Canopy is the market leader in cannabis in Canada, where the drug will soon be legally available nationwide to consume recreationally.

Through its subsidiaries, Tweed and Spectrum Cannabis, Canopy has established a global presence in 11 countries.

As part of the proposed transaction, Constellation will nominate four directors to Canopy’s seven-member board of directors, chaired by founder Bruce Linton.

Canopy will keep its position on the Canadian stock exchange and the group’s existing management team will remain in place.

“Our business can now make the strategic investments required to accelerate our market position globally,” said Linton.

“Constellation’s concentration of global cannabis activities exclusively through Canopy, coupled with the investment and its expert capabilities in brand-building, marketing, consumer insights and M&A, will be a huge benefit as we look to expand our portfolio in Canada, the United States and emerging cannabis markets around the globe.

“We view this investment in our business as an endorsement of our execution since forming our initial strategic relationship in October 2017.”

The deal is expected to be completed by the end of October.

For more information on the burgeoning legal cannabis sector and its impact on spirits, see the August 2018 edition of The Spirits Business magazine, out now.

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