Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) continues expanding its presence in the United States after signing a deal with a popular California extracts brand.
On Wednesday, the cannabis producer announced that the company and a California producer Lemurian, Inc. which owns the brand Jetty Extracts have reached agreements where Canopy would acquire 100 per cent of the equity interests of Jetty upon federal legalization occurs or earlier at Canopy’s choice.
Under the agreement, Canopy will make upfront payments of around US$69 million payable through cash and the majority with common shares in exchange for 75 per cent of the equity interests in Jetty.
Jetty is one of the top 10 brands and top five in the vape category in California. The company has a solventless vape and extraction-related intellectual property and has achieved strong growth over the past two years while generating positive earnings before interest, taxes, and depreciation in the competitive California market.
The agreement presents Jetty with an opportunity to collaborate with Canopy’s United States network which includes the right to acquire Acreage Holdings, Inc. (CSE: ACRG.U) and Wana Brands as well as conditional ownership of TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF).
The two firms are also looking into bringing Jetty to Canada.
Canopy Growth stock went down by 2.65 per cent on Wednesday to $7.34 on the Canadian Securities Exchange.
Canopy CEO David Klein said the company is building a house of premium cannabis brands with a focus on the core growth categories such as solventless vapes.
“There are significant opportunities for Jetty to scale at the state-level across the U.S. by leveraging Canopy’s U.S. ecosystem, and we’re actively working on plans to bring the brand to the Canadian recreational market,” he said in a statement.
Klein said the agreement between Canopy Growth and Jetty is mutually beneficial and provides long-term growth opportunities both companies.
Jetty co-founder Ron Gershoni said Canopy shares the company’s vision and will support it as they bring its products across North America.
“We can’t wait to be a part of what Canopy is building as we continue to define the future of cannabis and introduce more consumers to what makes Jetty products so special,” Gershoni said in a statement.