Three major cannabis companies recently joined forces to create an unprecedented partnership that will enable the sale and cultivation of marijuana across Canada ahead of the country’s legalization of recreational marijuana next year.
Dentons represented Green House Holdings North America Inc., the North American branch of the Amsterdam-based cannabis seed company of the same name on an agripharm joint venture with Smiths Falls, Ontario-based Canopy Growth Corp., the world’s largest publicly traded cannabis company, and Denver-based National Concessions Group Inc., the largest legal weed company in the United States and one that does business as Organa Brands.
Organa Brands, which manufactures cannabis oil and other products like O.PenVAPE and Bakked, has turned to Montreal-based Stikeman Elliott for outside counsel on the transaction, while Canopy Growth has turned to Cassels Brock & Blackwell, another leading Canadian firm.
“It’s probably the most transformative joint venture partnership that the sector has seen to date in terms of both having the ability to partner in Canada and look at international opportunities,” said Cassels Brock associate Jonathan Sherman in Toronto.
Sherman was part of a team of Cassels Brock lawyers working on the deal for Canopy Growth, a group that included corporate finance partners John Vettese and Cathy Mercer, intellectual property partner Bernice Karn and financial services partner Chuck Rich.
Cassels Brock had previously represented cannabis producer Bedrocan Cannabis Corp., which was bought by Canopy Growth, then known as Tweed Marijuana Inc., in late 2015. Sherman noted that Cassels Brock has now started advising Canopy Growth, a role the firm picked up in the past few months.
The cannabis conglomerate has tapped Cassels Brock to advise on its various expansion efforts, including Canopy Growth’s August acquisition of New Brunswick-based cannabis production facility Spot Therapeutics Inc., which can produce over 4,000 kilograms of dried cannabis annually across 40,000 square feet.
In late October, Canopy Growth turned to Ontario’s LaBarge Weinstein to advise on its $200 million sale of a 9.9 percent stake in itself to spirits giant Constellation Brands Inc., which was advised on the landmark deal to sell cannabis-infused beverages by Nixon Peabody and Canadian firm Osler, Hoskin & Harcourt.
Cassels Brock’s Sherman said the tie-up between Canopy Growth, Organa Brands and Green House Seeds will allow the three companies to collaborate and explore opportunities for the sale and production of cannabis in jurisdictions where marijuana is subject to central government regulation. Since marijuana is not federally legal in the United States, the joint venture will not do business stateside, Sherman said.
As countries around the world continue to legalize medicinal and recreational marijuana, Sherman said that Canopy Growth and its joint venture partners will have more opportunities for growth and expansion internationally. And this is just the beginning of what could be a windfall of deals and partnerships up north ahead of Canada’s federal legalization efforts.
Sherman said he expects that they’ll be a significant number of deals over the next eight months as Canadian companies look to form strategic partnerships with other companies and expand their operations as experts are predicting a supply shortage come July 1, 2018, the day of widespread legalization in Canada.
“We’ve seen a lot of deals where companies are trying to acquire additional assets and additional property that expands [their] footprint within Canada,” Sherman said.
Canopy Growth will own 40 percent of the joint venture in the 20,000 square foot grow facility being built in Creemore, Ontario, which is located about 81 miles north of Toronto. Green House Seeds will also own 40 percent of the partnership, with Organa Brands taking a 20 percent stake in the joint venture.
Stikeman M&A partner David McCarthy, IP counsel Ryan Sheahan and associates Lindsay Gwyer, Matthew Hunt and Jonathan Lin served as outside counsel to Organa Brands. The Dentons team for Green House Seeds was led by corporate partners Eric Foster and Donald Luck, corporate counsel Keith Stein and associate Andreas Kloppenborg, all of whom are based in Toronto.