Home / Business / Roofing growth could be on the verge of making a huge bet on the legalization of marijuana in the US – The Motley Fool

Roofing growth could be on the verge of making a huge bet on the legalization of marijuana in the US – The Motley Fool

It could be called "Coming to America, Part II".

Bloomberg and CNBC reported Wednesday that Canadian top manufacturer of marijuana Canopy Growth (NYSE: CGC) is in talks to acquire the US-based cannabis operator Acreage Holdings (NASDAQOTH: ACRGF) . Both news organizations said that sources familiar with the matter believe Canopy is close to concluding a sales contract for the purchase of acreage. At the close on Wednesday, the market capitalization of Acreage Holdings was close to $ 2.5 billion.

Canopy Growth announced in January that between $ 1

00 and $ 150 million will be invested in the construction of a major hemp plant in New York State. But the possibility that the company might soon acquire Acreage Holdings could put Canopy on the verge of making a big bet on legalizing marijuana in the US.

  Marijuana plant on a globe covering part of the USA.

Source: Getty Images.

What Canopy Would Get

It is not surprising that Canopy Growth might be interested in Acreage Holdings. The company is considered the largest vertically integrated owner of multiple states of cannabis licenses and assets in the US, based on the number of states in which it holds licenses.

The total number of states is currently 19, including the acquisitions of Acreage that are still pending. These states have several of the largest cannabis markets in the US. Arcview Market Research estimates that the total addressable market in those states where Acreage holds licenses will grow to $ 14 billion by 2022.

Acreage announced the addition of a major asset in December With the acquisition of Form Factor, a manufacturer and distributor of cannabis-based foods and beverages across several states. Kevin Murphy, CEO of Acreage, said the deal had "put his company on a straight path to become the Procter & Gamble of cannabis."

If Canopy Growth Acreage Holdings buys, it would also gain impressive political connections. Former US House spokesman John Boehner and former Canadian Prime Minister Brian Mulroney are directors of Acreage.

Why It's a Big Bet on Legalizing Marijuana

There's a big deal in the potential acquisition of Acreage Holdings by Canopy Growth. As long as marijuana remains illegal at the federal level in the US, Canopy can not operate in the US marijuana market and maintain its listing on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX).

This No Problem with Canopy Growths Establishment of a hemp production facility in New York. The passage of the Farm Bill from 2018 in December legalized hemp (which is similar to marijuana from the cannabis factory, but unlike marijuana contains low levels of psychoactive chemical THC).

Should Canopy Growth buy and actively operate Acreage Holdings, however, the company violates the NYSE and TSX listing requirements. How Can Canopy Acquire Areas? One scenario is that the company could acquire Acreage in such a way that its ownership does not take effect until the US legalizes marijuana at the federal level.

Such an approach would probably not make sense if changes were made to US marijuana laws were no likelihood in the not-too-distant future. But bilateral legislation permeates the US Congress to revise the federal laws on marijuana. There is a real chance that the legalization of marijuana in the US can be launched relatively soon. A multi-billion dollar acquisition of Acreage by Canopy would be a big hit that could happen.

What's Next

According to CNBC sources, Canopy Growth and Acreage Holdings spoke on Wednesday night to conclude an agreement. Bloomberg reported that a deal "could be announced earlier this week".

As for the law amending federal marijuana laws in the US, the prospects for passage in the democracy-controlled House of Representatives are very good. There are more hurdles in the Senate, but political pressure could increase for voting the bill. If that's the case, Senator Cory Gardner (R. Colo.), A sponsor of the legislation, says there will be enough votes to say goodbye and that President Trump will sign the bill.

We Should Know It Soon If Canopy Growth actually makes a big bet on legalizing marijuana in the US, it may take several months to see if that bet pays off quickly.

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