Canopy Growth Corp (TSX:WEED)(NYSE:CGC) jumped over 10% this morning after news broke that it was going to acquire Acreage Holdings Inc. In a deal valued at US$3.4 billion, it would give Canopy Growth a big opportunity to have a significant presence south of the border.
The one very big wrinkle in all of this is that the deal cannot be finalized just yet. Currently, Canopy Growth would run into issues on the TSX for investing in a cannabis company operating within the U.S. since it is still technically illegal. However, there is currently a bill in the U.S., the STATES Act, which would essentially allow individual states to govern themselves without the fear of federal lawmakers when it comes to cannabis. And although that’s been the case so far, there’s been no law formally recognizing it.
In an interview with BNN Bloomberg, Canopy Growth Co-CEO Bruce Linton said that the two companies have approached the deal very carefully with both regulators and exchanges, to ensure that “it would not step on any lines that would cause them to enforce anything”
It’s not a big surprise given that Canopy Growth has always been careful to ensure it doesn’t run afoul with the law and that it doesn’t upset investors.
Linton believes others in the industry will follow suit and notes that he has been in talks with other cannabis companies in the U.S. regarding a similar deal, and so there’s definitely interest on both sides. Once the necessary legislation passes that allows this deal to go through, it could open up the floodgates to even more deals.
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