Back in October, Constellation Brands bought a 9.9 percent stake in Canopy Growth Corp., one of Canada’s largest cannabis producers. Today, they upped their stake substantially with an additional $4 billion investment in the Canadian cannabis juggernaut. Now, Constellations holds 38 percent of Canopy. And going forward, it will have the opportunity to become a majority shareholder.
Inside Corona Beer’s $4 Billion Investment Into Canopy Growth Corp.
Constellation Brands is the company behind two beers, Corona and Modelo. And on Wednesday, the company announced a $4 billion dollar investment in Canada’s leading medical marijuana producer, Canopy Growth Corp. That investment secured Constellation a 38 percent stake in the company. But its a stake they acquired at an average price that’s 51 percent higher than Tuesday’s close.
For some analysts, the investment is a textbook case of the overvaluation of Canadian cannabis. But Canopy CEO Bruce Linton isn’t concerned, he says, because his company knows the market is trending toward cannabis as a product more than a commodity. And two of the product segments that have most attracted Linton are beverages and sleep aids.
In this regard, Canopy isn’t leading the pack. The California brewing company Lagunitas, which Heineken owns, already has a cannabis-infused sparkling water. Molson Coors is already in talks with Aphria and Aurora Cannabis, two other major Canadian cannabis firms, about marijuana-infused beverages.
Canopy’s stock had taken a hit after the company began trading on the New York Stock Exchange. But after the investment from Constellation, Canopy shares saw a 23.2 percent bump today. Constellation’s stock, however, is down 8.9 percent.
Will We Ever See Cannabis-Infused Coronas?
It’s clear that Constellation Brands is moving into the cannabis space and plans to begin marketing infused beverages. But only Canadian beer drinkers are likely to see cannabis-infused Coronas or Modelos. Constellation has no plans to launch cannabis-infused products in the United States, at least until federal prohibition is no longer a concern. But it could bring products to dispensary shelves in Canada in 2019.
Constellation CEO Rob Sands said that his company has come to a better understanding of the cannabis market and its tremendous growth opportunity. In a statement, Sands said his firm is looking at the “long term attractiveness” of the global, legal cannabis industry.
And with an eye toward the long term, part of Constellation’s latest $4 billion deal with Canopy Growth includes a three-year opportunity to purchase nearly 140 million in new shares. That’s a roughly $5 billion investment opportunity. And if Constellation takes it, it will obtain a controlling stake in Canopy.
But at the moment, Constellation plans for Canopy to continue operating as an independent company in Canada. It will, however, nominate four directors to the seven-member board at Canopy.