Canopy Growth Targets Profitability With New Cannabis Acquisition Deal

Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) is acquiring MTL Cannabis Corp. (CSE: MTLC) (OTCQX: MTLNF), the Canadian cannabis giant said on Monday.

What Happened

Under a definitive arrangement agreement, Canopy will acquire all of the issued and outstanding common shares of MTL, while settling all debt and debt-like instruments owed by MTL.

The transaction is valued at roughly CA$125 million ($90.9 million) on a fully-diluted equity basis and approximately CA$179 million on an enterprise value basis.

Under the terms of the deal, each MTL’s shareholder agreed to receive fixed consideration for each MTL share equal to 0.32 of a common share of Canopy Growth and CA$0.144 in cash.

Why It Matters

Luc Mongeau, the company’s CEO, stated that MTL enhances Canopy’s medical and adult-use cannabis presence nationwide.

“MTL brings skilled operators, strong brands, and a profitable business that will strengthen our leadership in Canada’s medical market and deepen our presence in key Canadian adult-use markets, including Québec,” Mongeau said. “Their cultivation expertise, combined with our national scale, positions us to improve product quality, expand supply, and accelerate our path to profitable growth.”

What’s Next

The deal will leverage MTL’s production assets to boost flower supply for Canadian and international markets.

It is also expected to support Canopy Growth’s goal of achieving positive adjusted EBITDA.

The company recently reported that its second-quarter adjusted EBITDA came in at a negative $3 million.

Additionally, international markets’ cannabis net revenue totaled CA$5 million, representing a decrease of 39% year-over-year.

CGC Price Action

Canopy Growth’s shares traded 14.1566% higher at $1.8950 per share at the time of writing on Tuesday.