On June 25, 2020, Canopy Growth Corporation and Acreage Holdings, Inc. announced they have entered into an agreement (the “New Agreement”) to amend the terms of the arrangement agreement dated April 18, 2019, as amended on May 15, 2019 (the “Arrangement Agreement”).
Pursuant to the Arrangement Agreement, Canopy Growth agreed to acquire 100% of the issued and outstanding securities of Acreage pursuant to a plan of arrangement under the Business Corporations Act (British Columbia), subject to the satisfaction of certain closing conditions and contingent upon a change in federal laws in the United States to permit the general cultivation, distribution and possession of cannabis (the “Triggering Event”).
Pursuant to the New Agreement, the plan of arrangement will be amended to provide for the following:
i. Canopy Growth will pay Acreage shareholders and certain convertible security holders an up-front cash payment in aggregate of US$37.5 million;
ii. the creation of two classes of Acreage shares, with each existing Acreage subordinate voting share (the “Existing Share”) being converted into 0.7 of a Fixed Share and 0.3 of a Floating Share;
iii. upon the occurrence or waiver of the Triggering Event and subject to the satisfaction of certain closing conditions, holders of Fixed Shares will be entitled to receive 0.3048 of a Canopy Growth share for each Fixed Share held, representing a premium of approximately 120% to the June 24, 2020 closing price of the Existing Shares on the Canadian Securities Exchange (the “CSE”); and
iv. Floating Shares will be subject to the terms of a new call right in favour of Canopy Growth, exercisable following the occurrence or waiver of the Triggering Event at a price equal to the 30-day volume weighted average trading price of the Floating Shares on the CSE, subject to a minimum call price of US$6.41 per Floating Share, payable in either cash or Canopy Growth shares at Canopy Growth’s option.
In connection with the New Agreement, Canopy Growth has agreed to loan Acreage Hempco up to US$100 million pursuant to a secured debenture. Canopy Growth will loan Acreage Hempco an initial US$50 million. The remaining US$50 million will be subject to the satisfaction of certain conditions by Acreage Hempco. The debenture will bear interest at a rate of 6.1% per annum and will mature 10 years from the date the debenture is issued or such earlier date in accordance with the terms of the debenture.
The amendments pursuant to the New Agreement will require approval by the Acreage shareholders, the Supreme Court of British Columbia and the CSE.
Cassels acted for Canopy Growth with a deal team that included Jonathan Sherman, Jamie Litchen, Jeffrey Roy and Tayyaba Khan (Securities, M&A and Cannabis), Chuck Rich and Daniel Cipollone (Banking & Specialty Finance and Cannabis), and Chris Norton (Tax).