Canopy Growth Corporation (NASDAQ:CGC) (TSX:WEED) has entered into privately negotiated exchange agreements with a limited number of holders, including Constellation Brands, Inc. (NYSE:STZ) through its wholly-owned subsidiary Greenstar Canada Investment Limited Partnership, of the company’s outstanding 4.25% unsecured convertible senior notes due 2023, to acquire approximately CA$255.4 million ($198 million) aggregate principal amount of the notes from the note holders in exchange for common shares of the company and approximately CA$3 million ($2.35 million) in cash for accrued and unpaid interest.
GCILP, a subsidiary of CBI, is participating in the transaction and will acquire a minimum of 21.93 million Canopy shares and up to 30.7 million Canopy shares pursuant to its exchange agreement.
Transaction Details
In accordance with the terms of the exchange agreements, Canopy Growth has agreed to acquire the notes from the note holders for an aggregate purchase price of approximately CA$252.8 million ($196 million), which will be payable in such number of Canopy shares as is equal to the purchase price divided by the volume-weighted average trading price of the Canopy shares on the Nasdaq Global Select Market for the 10 consecutive trading days beginning on, and including, June 30, 2022, subject to a floor price of $2.50 and a maximum price equal to $3.50, which is the closing price of the Canopy shares on the Nasdaq on June 29, 2022.
The share consideration, for note holders other than GCILP, will be satisfied by the issuance of Canopy shares in up to two tranches as follows: on the initial closing of the transaction, anticipated to be June 30, 2022, 34.07 million Canopy shares will be issued to the note holders and in the event that the averaging price calculated over the averaging period is less than the market price, on or about July 18, 2022, up to such number of Canopy shares as is equal to the excess of the purchase price divided by the averaging price over the initial closing shares. The share consideration for GCILP will be issued solely on the final closing based on the averaging price.
GCILP currently holds CA$200 million aggregate principal amount of notes. Pursuant to the transaction, the company will acquire CA$100 million ($77.5 million) aggregate principal amount of the notes held by GCILP. GCILP will be issued a number of Canopy shares based on the VWAP during the averaging period, provided that GCILP will receive a minimum of 21.93 million Canopy shares and a maximum of 30.7 million, representing between 5.4% and 7.6% of the issued and outstanding Canopy shares on a non-diluted basis.
Constellation, though GCILP and CBG Holdings LLC, currently holds 142.25 million Canopy shares, representing 35.3% of the issued and outstanding Canopy shares on a non-diluted basis. GCILP’s participation in the transaction will be considered to be a “related party transaction” within the meaning of Multilateral Instrument 61-101 – protection of minority security holders in special transactions In addition, the transaction was approved by the board of directors of the company with Judy A. Schmeling, a director of CBI, Garth Hankinson, CFO and executive vice president of CBI, Robert Hanson, executive vice president and president – wine & spirits division of CBI and James Sabia, executive vice president and president – beer division of CBI, each having disclosed their interest in the transaction by virtue of their positions with CBI and abstaining from voting thereon.
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