$CGC, $STZ, $KO
The biggest of Canada’s booming marijuana growers, Canopy Growth Corp (NYSE:CGC), has further to go on a string of acquisitions that has seen it buy up at least 12 smaller firms in a year, but it is done buying other producers, CEO Bruce Linton said Monday.
Powered by a deal with Corona-maker Constellation Brands (NYSE:STZ) that has left it with $4.5-B to invest, Canopy is in 1st position to cash in on Canada’s legalization of marijuana for recreational use as well as expectations that the United States may follow.
Constellation is betting in part on the promise that federal legislation might eventually follow moves by state governments in the United States to legalize, opening the door to legal production countrywide, and there have been tentative signs that others may follow.
Coca-Cola Co (NYSE:KO) last year quashed reports that it was looking at developing cannabis-infused drinks and analysts have pointed to the area as a possible next investment for “sin stocks” like tobacco and alcohol makers.
Mr. Linton said that with Canopy taken, the other companies on offer in the sector looked too small to tempt major potential investors, pointing to the likelihood of more consolidation within the sector 1st.
He also said his own firm had bought as many producers as it needed and would focus instead on companies that may provide synergies with his central business of growing the plant.
“We will not be buying anyone who currently produces cannabis in Canada for sure,” Mr. Linton said. “We’re more interested in what exists in the pharmaceutical world than the cannabis world.”
When asked whether Canopy would consider acquiring growers outside Canada, Linton said there were no companies outside of Canada he would consider buying.
Canopy acquired medicinal marijuana producers in South America and Africa last year, and in April secured the right to buy New York based Acreage Holdings Inc for $3.4-B if the United States legalizes production and sale of cannabis.
Mr. Linton, whose recent investments include bio-pharma company C3 and British skincare company This Works, said Canopy is working on cannabis-infused drinks that would serve as an alternate to alcohol for people averse to hangovers.
“Tweed and Tonic”, which Mr. Linton said would come in ready to serve containers, would taste a little like lemon and appeal to older drinkers concerned about the impact of alcohol on their weight.
HeffX-LTN’s overall technical analysis for CGC is Neutral with a Bearish Bias.
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