Canopy Growth to acquire MTL Cannabis

Executive Summary

• Canopy Growth Corp. has entered into a definitive arrangement agreement to acquire all issued and outstanding common shares of MTL Cannabis Corp. in a transaction valued at approximately $125 million on a fully diluted equity basis and $179 million on an enterprise value basis.
• The acquisition is expected to establish Canopy Growth as the leading medical cannabis provider in Canada and significantly enhance its position in the Quebec adult-use market, leveraging MTL's cultivation assets and brand portfolio.
• The transaction is expected to be materially accretive to Canopy Growth’s adjusted EBITDA, driven by MTL’s profitable operations, positive cash flow, and anticipated annualized cost synergies of approximately $10 million.

Key Details

• Transaction Value: Approximately $125 million on a fully diluted equity basis; approximately $179 million on an enterprise value (TEV) basis.
• Consideration: MTL shareholders will receive 0.32 of a Canopy Growth common share and $0.144 in cash for each MTL share held.
• Premium: The transaction provides a premium of approximately 45% per MTL share based on the 20-day volume-weighted average trading price as of Dec. 12, 2025.
• MTL Financials (Trailing 12 Months ended Sept. 30, 2025):
  • Net Revenue: $84 million.
  • Gross Margin: 51% (before fair-value adjustments).
  • Operating Cash Flow: $11 million.
• Synergies: Estimated annualized cost synergies of approximately $10 million, expected to be realized over an 18-month period.
• Market Positioning:
  • Combined entity expected to become the leading medical cannabis provider in Canada.
  • Establishes No. 7 position in total Canadian adult-use cannabis market share.
  • MTL holds No. 1 national market share in upper mainstream flower and No. 4 in upper mainstream preroll joints.
• Asset Integration: Canopy Growth intends to fully integrate MTL’s cultivation and post-harvest assets to bolster flower supply for Canadian and international (specifically European) markets.
• Quebec Footprint: Acquisition includes two cultivation facilities and brands MTL and R'Belle, strengthening presence in Quebec, Canada's second-largest cannabis market.
• Shareholder Lock-ups:
  • Irrevocable voting support agreements represent ~75% of MTL shares.
  • Lock-up provisions apply to ~72% of Canopy Growth shares issued to MTL shareholders, with staggered release dates: 10% at 3 months, 20% at 6 months, 20% at 9 months, and 50% at 12 months post-closing.
• Management Retention & Compensation:
  • Richard and Michel Clement (Co-founders) entered into consulting agreements with performance stock units totaling $2 million each.
  • Michael Perron (MTL CEO) appointed as Canopy Growth COO; granted $30,000 in restricted stock units and options with an aggregate exercise price of $20,000.
• Regulatory & Closing Conditions:
  • Requires approval of at least two-thirds of MTL shareholder votes and a simple majority of non-excluded votes.
  • Subject to TSX approval, Competition Act (Canada) approval, and other customary conditions.
  • Termination fee of $4 million payable by MTL to Canopy in specified circumstances.
  • Expected closing: Before the end of February 2026.
• Advisers:
  • Canopy Growth: Financial adviser Canaccord Genuity Corp.; Legal counsel Cassels Brock & Blackwell LLP and Paul Hastings LLP.
  • MTL Cannabis: Financial adviser Haywood Securities Inc. (provided fairness opinion); Legal counsel Farris LLP.

Notable Quotes

• Luc Mongeau, CEO of Canopy Growth: "MTL brings skilled operators, strong brands and a profitable business that will strengthen our leadership in Canada's medical market and deepens our presence in key Canadian adult-use markets, including Quebec. Their cultivation expertise, combined with our national scale, positions us to improve product quality, expand supply and accelerate our path to profitable growth."
• Richard Clement, Co-founder and Chief Cultivation Officer of MTL Cannabis: "Joining Canopy Growth gives us the platform to bring that philosophy to more Canadians. Our respective portfolios are highly complementary, and we see a strong opportunity to expand MTL's reach through Canopy Growth's national distribution and retail relationships."