01—Abstract
Summary
Summary of the 8-K filed April 18, 2024. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. (NYSE: STZ) reported on April 18, 2024 that its indirect wholly-owned subsidiaries, Greenstar Canada Investment Limited Partnership and CBG Holdings LLC, converted their Common Shares of Canopy Growth Corporation into non-voting, non-participating Exchangeable Shares.
The companies also agreed to exchange approximately C$81.2 milliona of the C$100 million promissory note due December 2024 issued by Canopy for Exchangeable Shares, with Greenstar forgiving all accrued but unpaid interest and the remaining principal. Following these transactions, Greenstar and CBG hold 26,261,474 Exchangeable Shares and no other Canopy securities. The Company stated that the transactions are expected to eliminate the impact of Canopy on its equity in earnings and are aligned with its intent not to deploy additional investment in Canopy.
Investment in the Exchangeable Shares will be accounted for at fair value, with future impairments, if any, reported in income (loss) from unconsolidated investments. All Constellation board nominees resigned from Canopy's board effective April 18, 2024, and the investor rights, administrative services, co-development and other commercial agreements with Canopy were terminated, other than the consent agreement, certain termination agreements and the Note exchange agreement.
The Credit Agreement Amendment, previously entered into in October 2022, became effective on April 18, 2024 following the share exchange and board resignations. Canopy shareholders had approved the share capital amendment creating the Exchangeable Shares at a special meeting held on April 12, 2024.
02—Key points
Key Highlights
- Greenstar and CBG converted their Canopy Common Shares into non-voting, non-participating Exchangeable Shares on April 18, 2024.
- Approximately C$81.2 million of the C$100 million promissory note due December 2024 was exchanged for Exchangeable Shares, with accrued interest and remaining principal forgiven.
- Canopy issued 9,111,549 Exchangeable Shares for the Note Exchange, calculated at C$8.91 per share.
- Greenstar and CBG now hold 26,261,474 Exchangeable Shares and no other Canopy securities.
- All Constellation board nominees resigned from Canopy's board effective April 18, 2024, and Constellation's governance rights in Canopy ended.
- Investment in Exchangeable Shares will be accounted for at fair value, with future impairments reported in income (loss) from unconsolidated investments.
- The Credit Agreement Amendment became effective April 18, 2024, following the share exchange and board resignations.
03—Questions
Frequently Asked Questions
What did Constellation Brands do with its Canopy Growth investment?
Its subsidiaries Greenstar and CBG converted their Canopy Common Shares into non-voting, non-participating Exchangeable Shares, and exchanged approximately C$81.2 million of a C$100 million promissory note into additional Exchangeable Shares.
How many Canopy shares does Constellation now hold?
Greenstar and CBG hold an aggregate of 26,261,474 Exchangeable Shares and no other securities of Canopy.
Will Constellation retain influence over Canopy?
No. The filing states that Constellation has no further governance rights in relation to Canopy, and all of its board nominees resigned from Canopy's board effective April 18, 2024.
How will the investment be accounted for going forward?
The Company will account for its investment in Exchangeable Shares at fair value, and future impairments, if any, will be reported in income (loss) from unconsolidated investments.
Does Constellation intend to convert the Exchangeable Shares into Common Shares?
Not at present. Greenstar and CBG do not intend to convert the Exchangeable Shares or own Common Shares until U.S. domestic sale of marijuana could not reasonably be expected to violate the Controlled Substances Act, the Civil Asset Forfeiture Reform Act (as it relates to that Act), and related applicable anti-money laundering laws.
04—Continue