BC Bud. BC Tweed. Canopy Growth establishes joint venture to convert 1.3 million square feet of existing greenhouse in British Columbia

JOINT VENTURE INCLUDES OPTION FOR ADDITIONAL 1.7 MILLION SQ. FT. GREENHOUSE

SMITHS FALLS, ONOct. 11, 2017 /CNW/ – Canopy Growth Corporation (TSX: WEED) (“Canopy Growth” or the “Company”) is pleased to announce that it has entered into a definitive joint venture agreement to form a new company, BC Tweed Joint Venture Inc. (the “Joint Venture“) together with a large-scale greenhouse operator (“the Partner”) to develop 1.3 million sq. ft. of greenhouse growing capacity in British Columbia with an exclusive option to develop a further 1.7 million sq. ft. of existing greenhouse infrastructure at a second BC location.

Applications have been submitted for both sites and subject to Health Canada and other standard regulatory approvals, as well as a bit of luck, the Company is hopeful that it will have product available from the Joint Venture as soon as July 1, 2018.

Under the terms of the agreement and subject to third-party approvals required by the Partner, the Joint Venture has conditionally agreed to lease a 1.3 million sq. ft. (30-acre) greenhouse facility located on a 55-acre parcel of land in BC from an affiliate of the Partner, with an option to acquire the property. The Joint Venture significantly supplements the Company’s industry leading production portfolio and positions Canopy Growth with production and distribution facilities from coast to coast across the country.

“The Joint Venture allows us to expand our operational footprint for greenhouse production while increasing our institutional knowledge of operating large scale greenhouses,” said Bruce Linton, Chairman and CEO, Canopy Growth. “Our cannabis expertise already operating the largest cannabis greenhouse in the sector combined with experience of our new partner’s extensive large-scale greenhouse production record, is great news for our customers and investors.”

As consideration for entering into and operating the Joint Venture, Canopy Growth will, based upon various milestones and subject to required regulatory and stock exchange approvals, issue the Partner 310,316 common shares of Canopy Growth over two tranches and a further $2.75 million of common shares in two remaining tranches. Canopy Growth owns 66 2/3% of the Joint Venture.

To fund the development of the Joint Venture, Canopy Growth will contribute, in multiple tranches, an aggregate of $20 million in cash (of which approximately $1 million was advanced at closing), in exchange for Class A Preferred Shares with cumulative preferred dividends.

Following the expansion announcement at the Company’s existing Tweed Farms Inc. greenhouse facility in Niagara-on-the-Lake, ON, this Joint Venture will increase the total pro-forma greenhouse production footprint at Canopy Growth operation to approximately 2.3 million sq. ft., with an exclusive option to bring that footprint to 4.0 million sq. ft.

The Company has also announced indoor capacity expansion plans that will bring its total indoor production capacity to approximately 900,000 sq. ft.

The BC Tweed Joint Venture Partner brings multi-generational knowledge of greenhouse operations and efficiencies having managed and operated over 5.8 million square feet of greenhouse infrastructure in various climates throughout North America over the past 30 years. The Partner is an experienced large scale, low cost, hydroponic greenhouse operator, with industry leading food safety, traceability and compliance expertise and a deep focus on sustainable production practices and efficiencies. The Partner brings tier one assets and an operations team with over 200 years of combined growing experience.

This Joint Venture represents the sixth province with Canopy Growth operations. The Company is committed to building an international business with a strong national platform while supporting the local communities where it operates through job creation, meaningful stakeholder engagement, and local economic opportunity, highlighted most recently with the donation of over 3300 pounds of food and household goods across its sites to benefit local food banks in the lead up to Thanksgiving.

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