Corona’s Brewer Just Bet $4 Billion on Canadian Pot

Constellation Invests Additional $4B in Pot Grower

Constellation Invests Additional $4B in Pot Grower

The price that Constellation is paying values Canopy at about $12 billion, which is more than 40 times the revenue that the FactSet consensus foresees for Canopy's fiscal year ending March 2019, and 180 times profits for 2020-the first year in which analysts expect the unprofitable venture to report earnings. "As we look around the world, we're going to be expanding production, we're going to be doing more research, we're going to develop more intellectual property, we're going to create more leading brands, we're going to have more products and we're going to be way more global".

Constellation, among whose brands are Corona and Ballast Point beers and Robert Mondavi wine, will own 38 per cent of Canopy, up from about 10 per cent, according to a statement Wednesday.

Constellation's stock, however, fell almost 6% after announcing the investment.

As part of the partnership, Canopy has a services arrangement with Constellation to use its resources, which would help with a US expansion once permitted, Linton added.

Founded in 2013, Canopy Growth has become a leader in Canada's legal cannabis market. The U.S. legal cannabis industry is gaining economic and political clout, employing more than 200,000 workers, while the market for listed firms has exploded in Canada.

Constellation was among the first major alcohol producers to invest in marijuana production when it pumped almost $200 million into Canopy a year ago, but the latest announcement makes it by far the biggest investment in the industry.

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"Constellation gets it. This is happening globally", Linton told Quest, adding that Constellation can benefit by being the first to market with cannabis-based drinks while other beer and alcohol companies are still trying to figure out what to do in the market.

Mr. Linton stressed that Canopy is not looking to buy more growing facilities in Canada, where recreational marijuana becomes legal on October 17.

Canopy, based in Smiths Falls, Ontario, doesn't now have any operations south of the border, where marijuana is banned federally.

Canopy, which has a presence in 11 markets around the world, said it would make global growth a priority. Both companies said they have no plans to sell cannabis products anywhere unless it is permitted at all government levels. "We view the Canopy/Constellation news as further proof that a global market opportunity awaits, with Canadian-listed companies well positioned to participate given their head start and superior access to capital", he said.

The agreement Wednesday will also see Constellation nominate four directors to Canopy Growth's seven-member board of directors.

Canopy, Canada's largest marijuana company by market capitalization, is also granting Constellation warrants, which, if fully exercised, will lift its interest above 50 per cent and inject another $4.5-billion into the Smiths Falls, Ont. -based producer. Canopy's share price has nearly tripled. The transaction will bring Constellation Brands' ownership in the stock to approximately 38% assuming exercise of the existing Constellation warrants.

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