CanadaM&ANewsStock NewsStocksUSWhy Acreage Holdings Is Already the Big Winner from its Deal with Canopy Growth

Acreage Holdings Inc. (CSE:ACRG.U) is already benefiting from a deal that hasn't even gone through. Recently, we learned that Canopy Growth Corp (NYSE:CGC)(TSX:WEED) was going to acquire Acreage but that the purchase would be contingent on marijuana first being legalized federally in the U.S. While that seems like a long ways away, that doesn't mean it hasn't been yielding results for Acreage already.
David Jagielski David JagielskiApril 24, 20196 min

Acreage Holdings Inc. (CSE:ACRG.U) is already benefiting from a deal that hasn’t even gone through. Recently, we learned that Canopy Growth Corp (NYSE:CGC)(TSX:WEED) was going to acquire Acreage but that the purchase would be contingent on marijuana first being legalized federally in the U.S. While that seems like a long ways away, that doesn’t mean it hasn’t been yielding results for Acreage already.

Since announcing this deal, we’ve had a number of folks come to us and say, ‘We had contemplated a sale of our business, we had entertained a number of partners, and we would now like to redirect our efforts towards you and align with you guys

– Kevin Murphy, CEO of Acreage Holdings

Despite any changes in Acreage or if it brings in other companies into the fold, there is apparently no desire to change the purchase price from either side.

The companies confirmed that they are eyeing both the STATES Act and the SAFE Banking Act, which could be enough for a change in how the stock exchanges view U.S. cannabis. However, that’s only speculation and it’s ultimately up to the exchanges whether those bills are enough. If the TSX wants to take a hardline approach, then it could technically say that neither of those bills legalize cannabis federally.

Full legalization will take a long time and there’s not even a guarantee that either one of those bills will progress anyway. Murphy told BNN that he hopes that within 18 months cannabis will be allowed federally in the U.S. which seems to be a pipe dream at this point. The deal between Acreage and Canopy Growth does have an option to be cancelled if after 90 months cannabis still isn’t entirely legal in the U.S.

Many opportunities for Acreage to grow

It’s a long time for investors to wait for a deal to go through. In the meantime, Acreage can go out looking for acquisitions and building up its brand, being able to say that it has a deal with Canopy Growth in its back pocket. The good and bad part about the U.S. cannabis market is because of the illegality of cannabis, there’s a lot of segregation because many companies have to operate within individual States inside their own silos. Without being able to transport pot across State lines, companies are left to either have operations in each State they want to sell in, or acquire a company that already has a presence there. Neither option is cheap or economical, but it’s the only way to grow without breaking the law.

For Acreage, it creates a great opportunity to look for companies to acquire and continue to spread its reach. And by the time the necessary legislative changes happen to permit the deal between Acreage and Canopy to go through, there will be many more States that will have legalized cannabis, opening up many more opportunities for Acreage.

Although it’s unlikely that we won’t see the U.S. legalize marijuana within 7.5 years and for the deal to be cancelled, Acreage could end up the big winner if it uses the deal to help leverage other purchases and partnerships, grows in size, and then is able to walk away from the deal. It’s not a scenario that I see happening, but it definitely underscores just how big of an advantage Acreage has today thanks to a deal that is not even done.

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