Bengaluru — Constellation Brands, the maker of Corona beer, will invest another $4bn in Canada’s top cannabis producer, Canopy Growth, doubling down on one of a growing number of bets by the alcohol industry on legal pot.
Constellation was among the first major alcohol producers to invest in marijuana production when it pumped nearly $200m into Canopy last year but the latest notice makes it the biggest investment in the industry.
Canada, where 4.4-million people reported using the drug in the first half of the year, will fully legalise the recreational use of cannabis in October.
Constellation, Molson Coors and Anheuser-Busch are using the move by the US’s northern neighbour to hedge their bets for the future at a time when beer sales, roughly 60% of Constellation’s sales, are stagnating, particularly with the young.
Constellation will buy 104.5-million Canopy shares at C$48.60 ($37.12) per share, a 51.2% premium to the stock’s Tuesday closing price.
The deal will take Constellation’s ownership in Canopy to 38% from the 10% it took last October. Constellation could also increase its ownership to over 50% if it exercises warrants received as part of the deal.
"Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents and Canopy’s market-leading capabilities in this space," Constellation CEO Rob Sands said in a statement.
Sales of cannabis in US legal markets should nearly triple to $16bn by 2020 from $5.4bn in 2015, according to Euromonitor International.
Reuters
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