Canopy Growth Corp. of Smiths Falls, Ont., has an agreement to buy rival Canadian medical cannabis producer Mettrum Health Corp.
The $430 million purchase -- which is subject to approval -- will be made with Canopy Growth shares, which closed at $11.80 on the Toronto Stock Exchange on Wednesday. Mettrum shareholders will receive 0.7132 common shares of Canopy Growth per common share of Mettrum.
The deal will add 鈥渟ignificant acreage鈥� to Canopy Growth鈥檚 production capacity and bolster its product offering with two new national brands.
Canopy Growth鈥檚 bid for Mettrum represents the company鈥檚 most expensive acquisition to date, coming at a time when valuations across Canada鈥檚 marijuana industry are seeing massive gains.
Mettrum shares have climbed over 200 per cent year-to-date, but Canopy Growth Chairman and CEO Bruce Linton is convinced the price is well worth it.
鈥淵ou think over the next two to three years, how valuable this asset will be in the context of international demand, domestic, recreational, and medical. When I look at it that way, it appears to be a pretty practical thing to do,鈥� he told CTVNews.ca.
Mettrum, like Canopy Growth, was one of the early entrants in the Canadian medical marijuana production space. The Bowmanville, Ont. company is known for its 鈥淢ettrum Spectrum鈥� strain classification system designed to help healthcare professionals and patients select the right bud.
鈥淭hey鈥檝e made great inroads in getting into doctor鈥檚 offices and kind of being top of mind in who doctors are recommending,鈥� said Gerard Ferguson of Front Street Capital in a Nov. 10 appearance on the Business News Network鈥檚 Market Call.
Canopy Growth 鈥� Canada鈥檚 largest producer of medical marijuana 鈥� has been at the centre of a Canadian marijuana stock buying frenzy fueled by Ottawa鈥檚 march towards legalizing recreational use in 2017.
Several Canadian marijuana stocks went on a wild ride on Nov. 16. The TSX halted trading on six different medical marijuana companies over the course of the trading session.
Canopy was halted five separate times. Its stock surged as much as 33 per cent, dropped as low as 27 per cent and ended down 15.24 per cent to close at $11.40 per share. More than 24 million shares of Canopy changed hands that day.
鈥淚t could be (considered) crazy, but I don鈥檛 think so,鈥� said Linton. He believes the attention is coming from investors south of the border who want a piece of the marijuana industry, but lack domestic investment opportunities.
鈥淵ou have a system of companies in Canada that could be the best ones in the world, and you have a lot of capital running out of America,鈥� he said. 鈥淐ompanies here have advantages as they prepare for those next markets.鈥�
Canopy鈥檚 deal to acquire Mettrum comes on the heels of a smaller bid for German-based MedCann, a cannabis distributor, importer and manufacturer. That all-stock deal is worth about $7.2 million based on Canopy Growth鈥檚 Nov. 25 closing price of $10.60. MedCann has successfully placed Canopy Growth鈥檚 Tweed-branded buds in German pharmacies, giving the Canadian producer a foothold in Europe鈥檚 largest economy.
Canopy Growth has a market value of about $1.3-billion based on Wednesday鈥檚 stock price.
