Canopy Growth has agreed to roll up one of the biggest US marijuana growers in a $3.4 billion deal. However, the companies said Thursday that Canopy’s acquisition of NY-based Acreage Holdings is contingent upon cannabis production and sales becoming legal at a federal level. Canopy hopes to navigate regulatory pitfalls with the influential people Acreage has on its board, including John Boehner, the former speaker of the House of Representatives and William Weld, the former governor of Massachusetts and a Republican presidential candidate. In the deal, Canopy will pay Acreage roughly $300 million in cash up front. If federal legalization happens, Canopy said it would pay Acreage shareholders 0.5818 share in Canopy Growth for each Acreage share held. The companies valued the entire transaction at about $3.4 billion. Acreage’s stock trading over the counter rose nearly 1% Thursday, to $22.51. Canopy shares jumped 4% Thursday. The stock has gained 72% so far this year.<doc-sep>Bloomberg (Bloomberg) -- Credit Suisse Group AG executives ignored warnings from colleagues about troubled steel tycoon Sanjeev Gupta as they channeled $1.2 billion of client funds to his businesses, according to people familiar with the matter.Bankers in Credit Suisse’s commodity trade-finance unit blacklisted Gupta’s Liberty Commodities Ltd. in 2016 because they suspected some of its deals weren’t legitimate, the people said. When they learned about two years later that the bank was lending to his companies through a suite of investment funds, which eventually grew to $10 billion, they flagged their worries to leaders in compliance and the division that housed the loans, one of the people said.The disclosure that Credit Suisse may have put clients at risk despite internal concerns over Gupta’s businesses adds a new twist to the debacle stemming from the March implosion of Greensill Capital, the finance firm at the center of the three-way relationship.Investigations, LawsuitsThe U.K. Serious Fraud Office is now investigating Gupta’s group of companies for suspected fraud, including in its financing deals with Greensill, according to a May 14 statement. Credit Suisse has sued to force Gupta’s Liberty Commodities into insolvency and has since shut the funds that made the loans and launched an internal investigation. Investors are staring at losses as the bank confronts embarrassing lawsuits.“We are currently focusing our efforts on recovering our investors’ money,” Will Bowen, a spokesman for Credit Suisse in London, said in an emailed statement, adding that the bank’s internal probe will focus on “all of the issues” linked to the funds. “We are committed to learning the lessons and will share the relevant lessons learnt at the appropriate time.”Andrew Mitchell, a spokesman for the Gupta Family Group Alliance, or GFG Alliance, a collective of businesses linked to Gupta including Liberty Commodities, denied any wrongdoing.The Greensill saga represents just one of the two disasters that rocked Credit Suisse in the first half of 2021. Since Greensill began unraveling, the bank has announced a $5.5 billion hit from the blowup at Archegos Capital Management.ApologiesFormer Chairman Urs Rohner apologized to shareholders and his successor, Antonio Horta-Osorio, who arrived at the end of April, has promised a sweeping strategy review.Chief Executive Officer Thomas Gottstein, who was head of the division that oversaw trade finance, wasn’t aware of the internal concerns about Gupta that had prompted the bank to cut him off, according to a person familiar with the matter.Employees at the trade-finance unit, which lends money for the buying and selling of commodities, cut ties with Gupta in 2016 after becoming skeptical toward his Liberty Commodities, the people said. They distrusted the documents the company provided, triggering doubts about its transactions, they said. In one example reported by Bloomberg, the company had presented another bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.Banking TiesLiberty Commodities pledged assets to Credit Suisse as security for borrowings in 2013 but by early 2016, all such commitments had been extinguished, indicating that the financing relationship had ceased, U.K. Companies House filings show. And while Gupta’s company listed the Swiss bank as one of its lenders in its 2014 annual report, it didn’t in the following year’s report, which is dated May 2016, according to the filings.Their counterparts at other banks, including Macquarie Group Ltd. and Sberbank PJSC, halted trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc. also stopped in 2016, Bloomberg has reported.Nevertheless, executives at Credit Suisse’s asset-management division -- which creates investment products for clients and charges a fee for overseeing them -- began arranging a suite of funds focused on supply-chain finance in 2017. The entities bought securitized loans packaged by Greensill, a firm created by Australian businessman Lex Greensill. Much of the debts were linked to Gupta’s businesses.WarningsOfficials at the commodity trade-finance unit were concerned when they found out about the funds’ links to Gupta and took their fears to Thomas Grotzer, general counsel for the bank’s Swiss division. They also warned Luc Mathys and Lukas Haas, the bankers who helped oversee the trades at the asset-management unit.Grotzer was promoted last month to interim global head of compliance at Credit Suisse. He didn’t respond to requests for comment. Mathys, head of fixed-income at the asset-management division, and Haas, a portfolio manager, were put on temporary leave in March. Neither responded to requests for comment.The bank pushed ahead with the funds and marketed them to investors as being made up of short-term debt secured on invoices, assets considered so safe that Credit Suisse gave the largest vehicle its lowest rating for risk. Yet part of the loans were linked to mere possible future revenues.Other parts of the bank continued working with Gupta as well. Credit Suisse’s investment bankers were due to lead an initial public offering for Liberty’s U.S. steel arm, which was ultimately pulled, according to a statement from the company. Gupta also announced that the Swiss bank would finance his planned acquisition of Thyssenkrupp AG’s steel unit, which fell apart earlier this year.Credit Suisse has so far recouped about $5.9 billion of the $10 billion in these supply-chain funds, but it remains unclear how much will be returned ultimately to investors. Loans to Gupta’s businesses are among a batch of debts that are the “principal sources of valuation uncertainty,” the bank said earlier this month.Liberty Commodities’s external legal advisors investigated “alleged rumors concerning the paperwork” it used in 2019, according to Mitchell, the spokesman for GFG Alliance. They found no evidence to substantiate the rumors, nor was the company “ever subject to further complaints or proceedings,” he said.“LCL has ongoing banking relationships with separate financial institutions,” Mitchell said, referring to Liberty Commodities. “The trade-finance market has been hugely challenging for all but the very largest commodities traders in recent years. Nevertheless, no financial institution has been left out of pocket as a result of lending money to LCL. On the contrary, they have received substantial commercial returns.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>Canopy Growth, the Canadian cannabis conglomerate, which owns a variety of marijuana brands and companies, has struck a deal to purchase the U.S.-based cannabis firm, Acreage Holdings, for $3.4 billion on the condition that marijuana becomes federally legalized in the United States, CNBC reports. Canopy is reportedly paying Acreage $300 million upfront, but the two companies will continue to operate separately for the time being. Should weed become federally legal in America, Canopy will earn the right to buy all of Acreage’s stock, though Acreage will in turn have access to various Canopy brands such as Tweed, one of Canada’s most prominent cannabis producers and retailers (Canopy itself was borne out of Tweed Marijuana Inc. in 2015.) “Today we announce a complex transaction with a simple objective,” said Canopy co-CEO Bruce Linton in a statement. “Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists. By combining Acreage’s management team, licenses and assets with Canopy Growth’s intellectual property and brands, there will be tremendous value creation for both companies’ shareholders.” Canopy is already valued at $14 billion, and last summer the company received a massive boost when the alcoholic beverage giant, Constellation Brands — the parent company of Corona, Modelo, Svedka and more — invested $4 billion. The company is also making cultural inroads, teaming with Seth Rogen to launch a recreational cannabis company, Houseplant, in Canada, as well as Martha Stewart, who will help to develop various CBD products (their first venture will be “sensible products for people’s beloved pets”). Acreage, meanwhile, is based in the U.S. but is publicly traded in Canada. The company has invested in medical and recreational cannabis retail and cultivating operations across the U.S. and boasts a board that notably includes former Republican Speaker of the House, John Boehner. In February, Acreage made news when CBS rejected a proposed Super Bowl ad about the medical benefits of marijuana.<doc-sep>
Canadian licensed producer Canopy Growth announced this week its intent to acquire U.S.-based Acreage Holdings in a $3.4 billion deal once cannabis becomes federally legal in the U.S. According to a MarketWatch report, an insider source said the deal was “98% done.” Part of the deal includes an immediate $300 million payment from Canopy Growth to Acreage Holdings. The acquisition must be delayed because of Toronto Stock Exchange rules that say publicly listed companies (like Canopy Growth) cannot possess any illegal holdings at the risk of being de-listed, and cannabis remains a federally prohibited business in the U.S. Acreage Holdings is one of the leading multi-state cannabis operators in the U.S. with its footprint (including pending acquisitions) having recently stretched to 20 different state markets. The company also boasts several high-profile board members, including former Republican Speaker of the House John Boehner and former Massachusetts Gov. Bill Weld. “Today we announce a complex transaction with a simple objective. Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists. By combining Acreage’s management team, licenses and assets with Canopy Growth’s intellectual property and brands, there will be tremendous value creation for both companies’ shareholders.” — Bruce Linton, chairman and co-CEO of Canopy Growth, in a press release “From the first day we created our company, providing exceptional customer care and delivering shareholder value have been our top priorities. This transaction will help accomplish both,” Kevin Murphy — Acreage Holdings’ chairman, CEO, and president — said in the release. Until cannabis is federally legalized in the U.S. and the deal carried out, the companies will continue to operate independently. 99 ENGAGEMENTS Facebook Twitter Linkedin Exclusive offer from our sponsor: End