Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/1181164
6 LEXPERT MAGAZINE | OCTOBER 2019 DOHERTY: e transaction provided an immediate cash distribution to Acreage Holdings shareholders and retained inter- est holders. is was a compelling propos- ition given that growth-stage, capital-in- tensive businesses don't typically have the means to distribute capital to shareholders. Second, this was a company-defining mo- ment to join with two leading global part- ners in Canopy Growth and Constellation Brands. Finally, Acreage Holdings licensed certain Canopy Growth IP and can lever- age in its US markets Canopy Growth's brands, innovation, technology and know- how developed across all aspects of Canopy Growth's global business. LEXPERT: What was the atmosphere like in the boardroom? LITCHEN: Given the novelty of the struc- ture and the myriad of regulatory consider- ations at play, the boardroom discussions were more involved than in a typical M&A transaction. Significant time was spent over the course of several months walking the directors through the transaction structure, commercial rationale and related regula- tory matters. In addition, while negotiating with Acreage, Canopy Growth was simul- taneously in negotiations with its major shareholder, Constellation Brands, in order to obtain their consent to the transaction. In exchange for Constellation Brands' con- sent, the parties agreed to certain amend- ments to the terms of their existing warrants and investor rights agreement. e dual track negotiations added an additional layer of complexity to the boardroom dynamics in connection with the transaction. SHAER: e opportunity in the US was well appreciated by our board of directors; we had found a legal and regulatory compli- ant manner to participate in the upside of this market with one of the largest players in the US However, the complicated and novel nature of the deal required manage- ment and counsel to spend significant time walking through the deal terms and trans- action structure with the directors. Our management team, in-house and external counsel managed to find a unique proposal to accommodate requests from Constella- tion Brands in exchange for their consent to the deal, while simultaneously negoti- ating the most complex M&A transaction the cannabis industry has seen to date. ROBERT FONN, DLA PIPER (CANADA) LLP (FOR ACREAGE HOLDINGS): e deal teams on both sides of the table were singularly focused on supporting Acreage Holdings' and Canopy Growth's goal to achieve their desired outcome on an abbreviated timeline. Canadian and US corporate, securities, tax, IP and regu- latory counsel were solving issues resulting from the transaction structure rather than engaging in the to-and-fro that you might otherwise encounter. e "can do" atti- tude extended beyond counsel to Acreage Holdings' transfer and paying agent and shareholder communications advisor to appropriately communicate and explain the deal to stakeholders. We enjoyed a product- ive rapport with staff of the Ontario Se- curities Commission and Canadian Secur- ities Exchange as they navigated the novel transaction structure and related disclosure issues; all while endeavouring to preserve the parties' timeline. LEXPERT: Finally, what was most memor- able about working on this deal? LITCHEN: While there are always unique elements to every M&A deal, being en- gaged by a client to develop an innovative transaction structure is notable in an M&A practice. We spent months analyzing the legal and regulatory landscape, engaging with the various stock exchanges, discussing various potential alternatives and under- standing the safeguards and potential risks that the structure could expose the parties to. Working hand in hand with Canopy Growth in the development and evolution of this structure over numerous months with multiple potential targets and seeing it all come to fruition with Acreage and their counsel on announcement of the trans- action has been incredibly rewarding. SHAER: Managing numerous legal, tax and financial considerations, negotiating with multiple parties and addressing di- verging viewpoints internally and exter- nally on a precedent setting transaction was certainly a challenge but also made this transaction memorable. FONN: DLA Piper (Canada) has been for- tunate to support Acreage Holdings since early 2017 and we have tremendous pride in our trusted advisor role, including with respect to this transaction. Our team, in- volving a number of colleagues from our Toronto and Vancouver offices, liaise with the Acreage Holdings management and legal teams on a daily basis. To assist on con- cluding the first stage of this game-changing transaction was incredibly gratifying … and made up for the back-to-back all-nighters required to get the deal signed. ON THE DEAL