Marijuana producer Canopy buying 20% of Indiva

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Canadian cannabis producer Canopy Growth has reached a deal to acquire a 19.99% stake in edibles maker Indiva, while also gaining control of all distribution and sales of Wana branded products in Canada.

Wana is one of the top cannabis edibles brands in North America.

The deal helps Indiva and Canopy avoid a potentially messy fight involving the Wana brand.

As part of the deal, Canopy and India entered into a license arrangement providing Canopy with exclusive rights to manufacture, distribute and sell Wana products in Canada.

The two companies have entered into a contract manufacturing agreement under which Canopy is granting Indiva the exclusive right to manufacture and supply Wana branded products in Canada for five years.

Canopy said that is consistent with its “asset light” strategy.

At the conclusion of the five-year term, there is an option to renew the agreement for an additional five years if both parties agree.

To finance the transaction, Canopy will subscribe for 37.23 million Indiva common shares, for gross proceeds of 2.16 million Canadian dollars ($1.7 million).

The balance of the consideration includes CA$844,383 and a cash payment of CA$1.25 million on May 30, 2024.

In 2020, Indiva locked down the exclusive right to produce and distribute Wana products, including gummies and soft chews, in Canada. In February 2021, that deal was amended and extended to a five-year term.

Later that same year, Canopy announced it had agreed to buy Wana Brands pending federal legalization of cannabis in the United States.

Had Canopy exercised its option to buy Wana prior to the conclusion of the Indiva-Wana deal, causing Wana to terminate its agreement with Indiva, Indiva would have been entitled to receive a termination payout worth four times the most recent three months of gross revenue from the sale of Wana products in Canada.

“Collectively, these agreements provide Canopy Growth more complete ownership over the value chain for the Wana brand in Canada, while ensuring continuity of high-quality manufacturing and consistency with Canopy’s asset-light production strategy,” Canopy CEO David Klein said in a statement.

“By better aligning our ownership position in Wana throughout North America, we expect to accelerate the introduction of product innovation in Canada that has already proven enormously popular in the United States.”

After the deal closes, Canopy will have the ability to nominate a board observer on Indiva’s board of directors.

The private placement is expected to close by June 6.

Canopy shares trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq.

Shares of Indiva are traded on the TSX Venture Exchange as NDVA.