Canadian pot giant Canopy Growth Corp. (TSX: WEED) (Nasdaq: GCG) is selling off a German cannabinoid pharmaceuticals subsidiary for around half of what the firm bought it for two years ago.
On Wednesday, the company said it’s made a deal to “divest” C³ Cannabinoid Compound Company GmbH to Dermapharm Holding SE (WKN: A2GS5D) (ISIN: DE000A2GS5D8), a European pharmaceutical firm headquartered in Grünwald, Germany.
Canopy is selling C3 for €80 million (around $115.5 million) as the transaction closes, with an earnout payment of up to €42.6 million (around $61.4 million) subject to C3 achieving certain milestones.
In May 2019, the Canadian operator bought C3 for $324.9 million. On the transactions alone, and given that Canopy gets the full earnout payment, it will lose around $116 million.
The acquisition would allow it to accelerate commercial sales and increase its economic footprint in Europe, former-CEO Bruce Linton said at the time.
By selling C3, the firm is “continuing its evolution” into a consumer-packaged-goods organization, and furthering its strategy of focusing on its core markets, according to a statement.
As a result of the sale, Canopy says it expects to avoid future operational complexities with C3, while significantly reducing short-term capital requirements.
“Canopy is maturing as a consumer product company — leveraging our market focus, innovation, and R&D strength to produce cannabis and cannabinoid-based products that make a positive impact on consumers lives,” CEO David Klein says in a statement. “We remain committed to serving the medical cannabis market as a channel and will continue to do so by leveraging our existing high-quality supply of Canadian cannabis products to meet patient demand globally.”
As per the agreement, all C3 employees will be retained by Dermapharm.
In November, Canopy’s CFO and chief product officer stepped down, after closing its Niagara facility and stating that the firm wouldn’t be EBITDA-positive in fiscal 2021 despite promises made months before.
Read more: Canopy CFO and CPO step down from board
Read more: Canopy pushes out fiscal 2022 profit predictions, closes Niagara facility
Company stock fell 3 per cent Wednesday to around $11.40 on the Toronto Stock Exchange.
nick@mugglehead.com
