Beer Maker Invests $4B in Pot Producer

The investment is the largest one to date in the cannabis sector.

Marijuana Ap
AP file

The parent company of Corona beer and other alcoholic drinks is expanding its partnership with a Canadian pot producer, betting on the continued growth in the medical and recreational cannabis markets.

Constellation Brands Inc. said Wednesday it's buying 104.5 million shares worth $4 billion in Canopy Growth Corp., boosting its stake in the company to 38 percent after its existing warrants are exercised.

The companies said the investment is the largest one to date in the cannabis sector. Constellation originally invested in Canopy last October.

Constellation will also get nearly 140 million new warrants it could exercise over the next three years. If it does so, Constellation will own a majority stake in the Smiths Falls, Ontario-based company.

"Constellation's investment in Canopy is a large bet at a very rich price, which can only be justified if the company proves that it can benefit from the changing environment for cannabis in Canada and beyond," said Linda Montag, senior vice president at Moody's.

Canopy plans to use the investment to build or acquire assets worldwide in the markets that allow medical marijuana.

Constellation said the deal will add to its earnings starting in fiscal 2021. The Victor, New York-based company added that it won't pursue other mergers, acquisitions or stock buybacks for up to two years until after the Canopy deal closes.

More in Operations