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Canopy Growth (WEED.TO) (TWMJF) has once again changed the landscape of the legal cannabis industry…

Yesterday, the Wall Street Journal reported an investment by Constellation Brands (STZ: NYSE) into the Canadian licensed cannabis producer. Constellation will acquire 9.9% of Canopy Growth for $245 million (CAD) and has an option to increase the stake to 20%.

The exact terms of the deal are expected to be formally announced today but Canopy Growth CEO Bruce Linton stated that the deal was completed at a premium to the closing price on Friday.  

This is the first significant major cross-industry investment and we expect to see the cannabis stock market respond favorably to this development.

Focused on the Canadian Marijuana Market

According to the Journal, Constellation will work with Canopy to create and market cannabis-infused beverages. Constellation will not sell any such cannabis products in the United States unless marijuana is legalized nationally.

Constellation Brands has a portfolio of wine, beer and spirits brands that include Corona, Clos du Bois, Charles Smith Wines, Robert Mondavi, Casa Noble Tequila and Svedka Imported Vodka.

The international alcohol company and Canopy Growth will focus on the Canadian marijuana market. Next year, Canada plans to legalize recreational marijuana and in 2019, the country will legalize marijuana-infused products.

A Not So Surprising Development

Although this development is significant, many people expected to see Constellation enter the legal marijuana industry. Last year, Constellation CEO Rob Sands told the Wall Street Journal that the company is obviously trying to get first-mover advantage.

Sands said, “People who are using cannabis may be disinclined to drink as much as they might have otherwise, but maybe they weren't going to drink in the first place and then they drink something. Maybe the whole thing will work out synergistically.”

We are favorable on the implications this move will have on the legal cannabis industry and expect it to be a catalyst for the entire sector.

An Opportunity to Watch

We have been bullish on Canopy Growth and this development leaves us even more favorable on the company.

The Canadian cannabis firm is by far the largest and most diverse licensed medical marijuana producer and has a greater breadth of multi-site management than any other cannabis firm in the world. Canopy Growth is levered to the cannabis market in Germany, Australia, Spain, Chile, Spain, and Denmark.

Canopy Growth will once again be stealing headlines after this development and this is something that investors need to watch. We will also be monitoring how this development impacts its peers like Aurora Cannabis (ACB.TO) (ACBFF), Aphria (APH.TO) (APHQF), MedReleaf (LEAF.TO) (MEDFF), Organigram Holdings (OGI.V) (OGRMF), CannTrust Holdings (TRST.CN), Supreme Pharmaceuticals (FIRE.V) (SPRWF), Cronos (MJN.V) (PRMCF), Emblem (EMC.V) (EMMBF), WeedMD (WMD.V), and CanniMed Therapeutics (CMED.TO) (CMMDF).