Canadian cannabis producers speed entry into US via high-stakes wagers

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Canadian cannabis companies have picked up the pace to position themselves in the fast-growing markets south of the border – with a number of the deals essentially a wager that the United States will soon legalize marijuana.

The recent deals add up to hundreds of millions of dollars and include:

  • Options to acquire equity in midsized U.S. multistate operators.
  • The acquisition of a marijuana company’s debt.
  • Purchases of CBD companies.
  • Strategic partnerships.

The CBD deals are the most straightforward, since hemp-derived CBD is legal in the U.S.

In August, for example, Canadian-based Village Farms International acquired Colorado CBD company Balanced Health Botanicals for $75 million.

Village Farms said it views the deal as a “potential pathway” into American THC markets once federal legalization occurs.

By contrast, the marijuana deals are more complex, since the plant remains illegal under federal law.

Still, one of the latest deals – which involved easing the debt repayment terms of Los Angeles-based MedMen Enterprises – indicates an evolution in what is deemed permissible by U.S. securities regulators and exchanges.

The transactions carry risk, of course.

Noteworthy Cross-Border Marijuana and CBD Deals Since 2017

October 2017Alcohol giant Constellation Brands acquired a 9.9% stake in Canopy Growth for $190 million with an intention to expand into cannabis-infused beverages. New York-based Constellation exercised warrants in 2020 to increase that stake to 38.6%.
December 2018Tilray announced a partnership with brewer Anheuser-Busch to develop cannabis-infused beverages.
March 2019U.S. tobacco giant Altria Group buys a 45% stake in Cronos Group for $1.8 billion, with a warrant to increase that holding to 55%.
April 2019Canopy Growth agrees to buy New York-based Acreage Holdings for $3.4 billion – contingent on the U.S. legalizing marijuana.
May 2020Aurora Cannabis agrees to acquire hemp-derived CBD company Reliva for $40 million in stock and an additional $45 million in cash and stock if certain financial targets are met.
June 2020Canopy Growth revises deal to acquire Acreage Holdings for roughly $900 million.
October 2020Cronos Group and U.S. actress Kristen Bell launch CBD skin-care product line called Happy Dance.
March 2021Organigram better positions itself for the U.S. market by signing a $175 million research and development partnership with a U.S. subsidiary of British American Tobacco.
June 2021Hexo Corp. purchases a 50,000-square-foot facility in Colorado for $4 million to create Truss cannabis-infused beverages as part of a joint venture with Molson Coors announced in August 2020.
June 2021A subsidiary of Cronos Group purchases an option to buy 10.5% of Chicago-based marijuana multistate operator PharmaCann for $100.4 million.
August 2021Tilray acquires a 21% ownership interest in Los Angeles-based MedMen Enterprises by buying $112.7 million worth of convertible debt and stock warrants.
August 2021Village Farms International acquires Colorado-based CBD company Balanced Health Botanicals for $75 million.
Sources: MJBizDaily research, Viridian Capital Advisors


Canadian companies seeking to make CBD plays in the United States face a saturated market, while an option to buy a U.S. marijuana company upon federal legalization is highly speculative, a gambler’s roll of dice.

“You don’t know when legalization will happen, what exactly the new regulations will and won’t allow, and which company will be doing well when it happens,” said Mike Regan, founder of Denver-based MJResearchCo and a contributor to MJBizDaily and MJBizFinance.

Acquisition prices aren’t as giddy as they were back in April 2019, when Canadian cannabis giant Canopy Growth agreed to buy New York-based Acreage Holdings for $3.4 billion – contingent on the U.S. legalizing marijuana.

By June 2020, the deal had been revised and the value slashed to $900 million, reflecting a cannabis stock slump and Acreage’s financial troubles.

But the prices remain relatively high, given the unknowns.

Take Canada-based Tilray, which in August announced it is part of a group acquiring most of Los Angeles-based MedMen Enterprise’s convertible debt as well as stock warrants that later can become equity in MedMen.

At the time of the deal, Tilray said it was issuing shares valued at $112.7 million to bankroll its portion of the transaction.

“This likely will be ‘dead money’ for quite a while,” New York-based Viridian Capital Advisors recently wrote.

Viridian elaborated that it “does not believe the U.S. is on the cusp of federal legalization,” meaning the deal won’t be generating cash for Tilray anytime soon.

But the Tilray-MedMen deal is significant in showing the evolution of securities regulation as the U.S. draws closer to federal legalization, Regan noted.

First, it was OK with the New York Stock Exchange and Nasdaq, Regan noted, that real estate investment trusts such as San Diego-based Innovative Industrial Properties (NYSE) and Florida-based AFC Gamma (Nasdaq) were providing capital to plant-touching companies by buying their real estate and facilities and leasing them back.

Next, lending to plant-touching businesses seemed to be OK with the Nasdaq when Silver Spike Investment Corp. received a letter on July 22 from Nasdaq approving the listing for the firm to “make loans … complying with state regulated cannabis programs, regardless of their status under U.S. federal law.”

Now, Tilray, also listed on the Nasdaq, is purchasing MedMen convertible notes and warrants in exchange for 9 million of its Nasdaq-listed Tilray shares. While the MedMen notes are debt today, they can become equity.

“Tilray used its Nasdaq-traded shares to acquire the convertible debt and ease the repayment terms for MedMen,” Regan noted.

“These debt structures allow the liquidity of the Nasdaq to indirectly provide capital to U.S. plant-touching operations, while the U.S. operators must still trade on the OTC (U.S. over-the-counter market) and CSE (Canadian Securities Exchange) with lower liquidity” he added.

“What’s allowed on U.S. exchanges seems to be inching closer and closer to equity of state-legal and federally illegal businesses, but it’s not there yet.”

Strategic risks

The 30,000-foot-view is that Canopy, Tilray and Canada-based Cronos Group – which recently purchased an option to buy 10.5% of privately held U.S. multistate marijuana operator PharmaCann – are taking risks to “strategically try to get a leg up” when the U.S. legalizes marijuana federally, Regan said.

Otherwise, “they would be entering a new foreign market against entrenched competitors that (with legalization) will have greater access to capital and liquidity,” he said.

Time will tell whether those gambles pay off.

Acreage and MedMen once were considered two of the brightest stars in the U.S. cannabis industry. Both now are midsized multistate operators, with MedMen especially struggling to stem losses.

In a recent interview with MJBizDaily, Canada-based Village Farms International CEO Michael DeGiglio was critical of the strategy of some Canadian cannabis companies to buy options in U.S. cannabis companies contingent on federal legalization.

“I think it’s nothing but hype and foolishness,” DeGiglio said, “not even knowing how (American marijuana companies are) performing in a year or two” or what the U.S. regulatory climate will look like once federal legalization takes place.

He added: “What does that really get me, other than a press release saying to the world, ‘I will participate in the U.S.?’”

Here’s a look at three of the recent marijuana and CBD deals:


In August, Tilray secured a 21% stake in Los Angeles-based MedMen Enterprises by acquiring convertible debt and stock warrants.

What Tilray CEO Irwin Simon said about the deal: Tilray is focused on building the world’s leading cannabis-focused consumer company and leading the U.S. market when legalization allows, and MedMen is “one of the most recognized brands in the $80 billion U.S. cannabis market.”

What MedMen CEO Tom Lynch said: The Tilray deal and a separate $100 million equity infusion led by Serruya Private Equity provide MedMen with cash and flexibility. “MedMen 2.0 is here, and we are thrilled to embark on the next stage of our journey.”

What Viridian Capital Advisors said: “Tilray is paying an excessive price for its investment in MedMen … Several comparable competitors have as good or better growth prospects than MedMen – and better profitability – so valuation near the top of the group is difficult to reconcile. Perhaps the optionality/safety of owning a debt instrument rather than straight equity is worth something, but not this much.”

Lowdown on MedMen: The company has been cutting costs and shedding operations since 2019 but is still losing lots of money: $157.6 million in its fiscal year ended June 26. The company ended the fiscal year with a negative shareholders equity of $253.6 million.

MedMen agreed in February to sell a potentially lucrative New York medical cannabis license – one of only 10 in the state – for up to $73 million to Massachusetts-based Ascend Wellness.

Now MedMen is relying especially on the Serruya infusion to maintain and expand its operations in such key markets as Arizona, California, Florida, Illinois and Massachusetts.


In August, Village Farms International acquired Colorado-based CBD company Balanced Health Botanicals for $75 million.

What Village Farms CEO DeGiglio said at the time: “The addition of the Balanced Health platform provides us with another potential pathway to participate in the US high-THC cannabis market, when permitted to do so … ”

He also noted the company’s 5.5 million square feet of high-tech greenhouse facilities in West Texas, which can be converted to cannabis production when allowed.

What the New York investment banking firm Cantor Fitzgerald said about Village Farms: The company, one of the main growers of produce crops such as tomatoes in North America, has become the lowest-cost producer among Canadian cannabis growers and has developed a “strong following” for its Pure Sunfarms flower brand.

The Texas greenhouse positions Village Farms well for future marijuana markets in Texas, as well as interstate commerce should the U.S. legalize marijuana.


In June, a Cronos Group subsidiary purchased an option to buy 10.5% of Chicago-based marijuana multistate operator PharmaCann for $100.4 million.

What Cronos CEO Kurt Schmidt said about the deal: “We were attracted to PharmaCann as an investment because of their disciplined capital allocation, strong track record and compelling licensed manufacturing and retail footprint.”

What PharmaCann CEO Brett Novey said: “This investment validates our position as a leading vertically integrated U.S. cannabis company and highlights our ability to continue to expand and enhance our strong asset base.”

What Piper Sandler analyst Michael Lavery said: “As expectations for federal legalization adjust to legislative reality, Canadian LPs have to look for ways to prepare besides just waiting for the gates to the U.S. to open.”

Lowdown on PharmaCann: The Illinois-based multistate operator focuses on the highest growth markets in the Eastern half of the United States with licenses in Illinois, Maryland, Massachusetts, Ohio, Pennsylvania and New York.

The company is one of the 10 medical cannabis operators in New York, so it is well positioned for the launch of adult-use sales as well as the introduction of smokable flower to the state’s medical marijuana market.

Jeff Smith can be reached at

Matt Lamers contributed to this report.