Canopy Growth Buys Rival Supreme Cannabis For $435 Million

Cannabis manufacturer Canopy Growth (TSX:WEED) is making another acquisition.

The Smiths Falls, Ontario-based cannabis producer is buying Supreme Cannabis (TSX:FIRE) for $435 million in a cash-and-stock deal aimed at bolstering Canopy Growth’s share of the recreational market.

The deal comes a few days after Canopy Growth announced that it had bought the parent company behind Ace Valley, a white-label cannabis company that sells pre-rolls, vapes and edibles in the Canadian market. While that deal expanded the company's premium offerings, the deal for Supreme Cannabis gives Canopy Growth another leading national brand that has a reputation for high quality and consumer traction.

Canopy Growth said in a news release that it expects approximately $30 million in cost synergies over the next two years once the deal closes. The company also said the tie-up with Supreme Cannabis will give it a 13.6% share of the Canadian cannabis market, including a top position in the premium dried flower and PAX vape categories.

Canopy Growth will also acquire a small cannabis cultivation facility in Kincardine, Ontario as well as some smaller medical and recreational brands in the deal.

In a news release, Canopy Growth will pay Supreme Cannabis shareholders 0.01165872 of a common share and $0.0001 in cash for each share, the company said. The offer represents a 66% premium to Supreme Cannabis’ share price as of April 7.

Consolidation in the Canadian cannabis sector is increasing. Last December, Aphria (TSX:APHA) announced a merger with rival Tilray (NASDAQ:TLRY), and Hexo Corp. (TSX:HEXO) announced in February that it will acquire Zenabis Global (TSX:ZENA) for $235 million.