By Adam Jones, Jul 11, 2018,  Market Realist

Another acquisition

On July 10, Canopy Growth (WEED) (CGC) announced that it had entered an agreement to acquire Hiku Brands Company (HIKU). According to the press release, Canopy Growth paid a ~33% premium above Hiku Brands’ 20-day VWAP (volume weighted average price) as of closing on July 9.

 

How the stocks reacted

The news broke in the final hour of the trading session on July 10. Following the news release, Hiku Brands was almost flat at 1.46 Canadian dollars, and Canopy Growth ended 1.5% lower at 38.1 Canadian dollars.

Why the acquisition?

As we get closer to October, when recreational cannabis sales are slated to begin in Canada, companies such as Canopy Growth, Aurora Cannabis (ACB) (ACBFF), Cronos (CRON), and others will likely make moves to acquire companies in order to be market movers in the recreational cannabis space.

Canopy Growth intends to capture customers through Hiku Brands’ retail establishments. Hiku Brands currently owns retail locations under the name of Tokyo Smoke. Interestingly, these locations are called “coffee shops.” The company’s website says that these stores marry “third wave coffee with best in class smoking products.” The company also sells cannabis-related accessories such as vaporizers and oil infusers.

Canopy Growth has moved towards brand differentiation early on as it tries to reach the adult recreational cannabis market through multiple brands and formats.