Canopy Growth caps monumental week with ‘historic’ $40M New Brunswick deal

The Ottawa-area firm also completed a $7M sale of a subsidiary
Pot

Canopy Growth (TSX:WEED) is making headlines again this week, this time reaching a deal worth millions of dollars to supply cannabis to New Brunswick.

The Smith Falls-based licensed cannabis firm, alongside fellow producer Organigram, said Friday that it will act as a supplier for a newly created provincial authority as part of a two-year agreement. A separate deal between the New Brunswick government and another pot producer, Organigram, was also announced Friday.

Canopy will provide upwards of four million grams of cannabis and derivative products in the first year of the deal, which the company says will be worth roughly $40 million.

A statement from the firm touts the memorandum of understanding as an “historic” step towards the federal legalization of recreational marijuana, a substantial industry and regulatory shift slated for July, 2018.

Elsewhere, Canopy announced Thursday evening that it had completed the sale of subsidiary marijuana producer to Cannabis Care Canada, an online medicinal marijuana supplier. The $7-million deal will see CCC take over Canopy's Bennett Road North facility in Bowmanville, a site previously operated under the Mettrum brand.

Cannabis producer Mettrum made the sale last September, before being acquired itself by Canopy. The facility is licensed to both sell and produce cannabis, but according to Mettrum’s original release, only produces roughly 500 kg annually.

Bennett Road North will be renamed Starseed Medicinal as part of the deal.

CCC has also entered into a three-year “take or pay” agreement with Canopy Growth. That deal will see CCC supply high-quality flowers and cannabis resin products to Canopy, with sales at the latter’s discretion.

CCC is financially backed by Laborers International Union of North America, the continent’s largest construction workers union with 100,000 Canadian members.

"Entering into an agreement of this scale with Cannabis Care Canada signals loud and clear that attitudes towards cannabis are transforming across mainstream society as workers and employers increasingly recognize the merits of medical cannabis over other existing alternatives," said Canopy Growth CEO Bruce Linton in a statement.

The release adds that Mettrum’s main Bowmanville facility, also located on Bennett Road, is unaffected by the sale. With retrofits following Canopy’s acquisition of Mettrum now complete, the company states the facility’s output has increased by 200 per cent.

This is the latest move in a big week internationally for Canopy Growth. The firm announced on Monday that it had entered into an agreement to supply Spanish cannabis producer Alcaliber with its strains and seeds to cultivate marijuana.

Then, on Wednesday, the firm announcement that it had landed a deal to become the exclusive cannabis supplier for an Australian company.

Shares of Canopy Growth rose 11 per cent over the week, starting Monday morning at $9.18 and ending more than a full-dollar higher at $10.27 after market close on Friday.