Cannabis stocks have been riding high, especially since legalization efforts in the U.S. have progressed as states look to plug budget holes left by COVID-19 with tax revenues from marijuana.
Canopy Growth appears to be attempting to capitalize on its elevated share price by purchasing Supreme Cannabis for about $350 million in what is essentially an all-stock deal. Each share of Supreme Cannabis stock will be exchanged for 0.01165872 of a Canopy Growth share and $0.0001 in cash.
The price per share Canopy has agreed to pay represents a 66% premium to Supreme’s stock price prior to the transaction. In exchange, Canopy is acquiring a portfolio of premium marijuana brands and will boost its market share in the Canadian market to 6%.
It also expects to recognize $30 million in synergies within two years of the transaction’s closing while conserving its strong balance sheet, which currently includes a $2.5 billion cash position.