Canopy Growth Corporation and Mountain High Products, LLC, Wana Wellness, LLC and The Cima Group, LLC, collectively Wana, have entered into agreements allowing Canopy Growth to acquire 100% of the outstanding membership interests of Wana upon federal permissibility of THC in the U.S.
Wana manufactures and sells gummies in the U.S. state of Colorado and licenses its intellectual property to partners, who manufacture, distribute, and sell Wana-branded gummies across the U.S. and Canada. Wana expects to have license agreements in place in more than 20 U.S. states, including in future adult-use markets in New York and New Jersey, before the end of 2022.
Upon exercising its right to acquire Wana, Canopy Growth will own and operate Wana's vertically-integrated facility in Colorado as well as its rapidly growing licensing division. This expands upon the coverage provided by the company's existing right to acquire Acreage Holdings, Inc., a U.S. multi-state operator, and the company's conditional ownership interest in TerrAscend Corp., another U.S. multi-state operator.
The Wana acquisition will strengthen Canopy Growth’s position in the U.S. and its edibles market.
"As we establish Canopy Growth as the world's leading cannabis company, acquiring the No. 1 cannabis edibles brand in North America will serve to strengthen our market position in both Canada and the United States," said Canopy Growth CEO David Klein. "The right to acquire Wana secures another major, direct pathway into the U.S. THC market upon federal permissibility, and in Canada we'll be adding the top-ranked cannabinoid gummies to our industry-leading house of brands. We're confident in the future growth of the edibles category and the tremendous opportunities with Wana."
The agreements are structured as three separate option agreements in which Canopy Growth has a call option to acquire 100% of the membership interests in each Wana entity. Canopy Growth will make an upfront cash payment of USD $297.5 million.
Upon exercise of the right to acquire each Wana entity, Canopy Growth will make a payment equal to 15% of the fair market value of such Wana entity at the time the option is exercised. As additional consideration for the right to acquire each Wana entity, Canopy Growth may make additional deferred payments in respect to each Wana entity as of the 2.5 and 5-year anniversary of the upfront payment, less certain deductions. At the option of Canopy Growth, the call option payments and the deferred payments may be satisfied in cash, shares or a combination thereof at the company's sole discretion.
Until Canopy Growth acquires each Wana entity, Canopy Growth will have no economic or voting interest in Wana, Canopy Growth will not control Wana, and the company and Wana will continue to operate independently.
"Today's announcement reflects the culmination of more than a decade of hard work, dedication and vision put forth by our employees and partners, as well as an unwavering commitment to the plant and our customers," said Nancy Whiteman, CEO and co-founder of Wana Brands. "We have long considered what the next phase of our growth might look like, and this deal is not only a great testament to our focus on bottom line growth and fiscal diligence, but also to the value we believe Wana can bring to Canopy and its shareholders now and in the future. We have met many partners along the way over the past 11 years, but none have felt like the best and right fit until today. We are incredibly humbled and honored to be part of what Canopy Growth is building in terms of the future of this industry."
Cassels Brock & Blackwell LLP is acting as Canadian legal counsel to Canopy Growth. Paul Hastings LLP is acting as U.S. legal counsel to Canopy Growth. Bryan Cave Leighton Paisner LLP is acting as legal counsel to Wana ownership.