Canopy Growth unveils new Latin America plan, buys Colombian medical marijuana company

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Leading Canadian pot producer Canopy Growth Corp. made several splashy announcements about its operations at home and abroad on Thursday, including a potentially US$150-million-plus plan to target Latin America’s emerging medical marijuana market.

“This isn’t a strategy about more growing that we’ll try to send back to Canada or something like that,” said Mark Zekulin, president and co-CEO of Canopy, during a conference call. “This is about building a Latin American market.”

As part of that plan, Smiths Falls, Ont.-based Canopy unveiled a new subsidiary, Canopy LATAM Corp., that “will advance medical cannabis throughout Latin America,” according to a release.

Canopy also announced that, through its newly-minted Canopy LATAM unit, it had acquired Spectrum Cannabis Colombia S.A.S., which was formerly known as Colombian Cannabis S.A.S. The deal could be worth up to approximately US$96 million in Canopy stock, depending on whether or not four future “milestones” are met. 

Colombian Cannabis had both an ideal site for growing and the required national licenses to produce, manufacture and export cannabis derivatives, the release said.

Spectrum Cannabis Colombia will now build the facilities needed for “value-added production and sales” in Colombia and the region around it, Canopy added, with construction expected to start by the end of this summer and finish within a year.

“Colombia has a proud history of agricultural production and global leadership, from coffee to cacao to roses to orchids, and thanks to progressive cannabis legislation, it is strategically positioned to serve as Canopy Growth’s production, processing, and export hub for Latin America with its operations central to the growth strategy for Canopy LATAM,” the release said.

Canopy LATAM will be led by Antonio Droghetti, “a seasoned executive with extensive experience throughout Latin America,” the release said. According to Canopy, Droghetti previously worked as a “senior leader” at Brazilian holding company Grupo Silvio Santos, as concessionaire of the Brasilia airport and as chief executive of Lifemed, a healthcare company. 

Droghetti said Thursday that things would “move fast,” with Canopy LATAM using Colombia as a base of production to supply the entire region.

Its Latin American subsidiary will lead Canopy’s strategy for Brazil as well, which the company says will initially focus on medical cannabis research.

“As the country reviews its medical cannabis legislation, Canopy LATAM will position itself to meet future demand for medical cannabis in this high potential market,” the release said.

Canopy LATAM will also take the added step of buying Canindica Capital Ltd., which is controlled by Droghetti. Canopy said it would pay Canindica shareholders approximately US$18.7 million in shares, as well as up to around US$37.3 million in additional stock based on four milestones being met.  

In July 2023, Canopy would make an additional all-stock payment to the parties who have reached all their milestones by that point, the release said. The size of the payments would be based on the fair market value of Canopy LATAM.

Furthermore, Canopy’s existing Chilean business will “operate as part of the broader LATAM structure,” the release said.

Canadian pot producers have shown strong interest in opportunities in Latin America, which offers a large medical market. In May, for example, Leamington, Ont.-based Aphria Inc. announced an exclusive supply agreement with a Colombian pharmaceutical distributor that was licensed to import, sell and distribute medical cannabis.

Canopy noted the Latin America region has a population of more than 600 million.  

“As other Latin American nations update their regulations related to medical cannabis, Canopy LATAM will identify opportunities and actively pursue local operations as part of a focused regional growth strategy while ensuing patients have access to high quality, regulated medical cannabis,” the release said.

Canopy also announced Thursday that it was one of 13 producers that had struck a supply deal with the Alberta Gaming, Liquor & Cannabis Commission. According to a release, Canopy will provide Alberta with more than 15,000 kilograms of cannabis products “to support the first six months of the province’s adult use recreational cannabis market set to open on October 17, 2018.”

The company rolled out plans to invest $40 million into a Fredericton production facility as well, which would allow Canopy to access up to $1.3 million in possible funding from a Crown corporation in New Brunswick. Per a release, the investment will help create 136 jobs over six years.

Canopy’s stock surged nearly 3 per cent to $39.77 per share around mid-afternoon on the Toronto Stock Exchange.

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