Cannabis firms Canopy Growth, Organa and Green House team up on a joint venture in Canada

The three firms will share ownership stakes in a 20,000-square-foot indoor grow facility in Creemore, Ontario

Three well-known players in the cannabis industry have partnered in the operation of an Ontario indoor cultivation facility, a site they say could serve as a springboard for international expansion.

Canadian cannabis conglomerate Canopy Growth Corp. plans to share the ownership stake in its Agripharm Corp. business — a 20,000-square-foot indoor grow facility in Creemore, Ontario in Canada — as part of a joint venture with Green House Holdings, the North American arm of the Dutch cannabis seeds company of the same name, and Colorado’s Organa Brands, the operator of extracts brands such as O.penVape and Bakked.

Under the terms of the joint venture, Canopy will keep a 40 percent ownership stake in Agripharm and Green House and Organa Brands will own stakes of 40 percent and 20 percent, respectively, the companies announced Friday. Green House and Organa will handle the oversight of the facility, with Green House managing the day-to-day operations and Organa providing technologies for cannabis extraction, the companies said.

Officials say that the joint venture could leverage the respective companies’ strengths — Canopy’s existing distribution platform within Canada and seven international markets, Green House’s experience in breeding, and Organa’s focus in extractions — to vault the partnership toward international success.

“Together, the (joint venture) is positioned to take sought-after genetics, insert those genetics into consumer-friendly ingestion formats, and put them on stores’ shelves across (Canada), and abroad,” officials for the companies said in Friday’s news announcement.

Agripharm will not conduct business in the United States.

Canopy Rivers Corp., a subsidiary of Canopy Growth, will contribute $20 million for the facility’s expansion in exchange for ongoing royalty payments and a warrant to acquire up to 4 percent of issued and outstanding shares, Canopy officials said. Full financial details of the deal were not immediately disclosed.

The agreement is expected to be finalized on or about Dec. 1.

Officials for Canopy and Organa were not immediately available for comment.

The joint venture marks a second major business development in three weeks for Canopy Growth, the Smith Falls, Ontario-based medical marijuana firm with a market capitalization of C$3.55 billion ($2.78 billion U.S.). At the end of October, alcohol purveyor Constellation Brands inked a deal to acquire a 9.9 percent stake in Canopy Growth for about $190 million. The deal, which includes options for Constellation to increase its ownership share to 20 percent, sets the stage for the two firms to develop a line of cannabis-based beverages for adults in Canada and, potentially, beyond.

Federally legal adult-use cannabis sales are on the horizon in Canada; however, the program’s July 2018 launch likely will allow only for the sale of cannabis flower. The regulated sale of edibles (including beverages) and concentrates is expected to come a year later.

In the interim, companies such as Canopy Growth are able to conduct research and development on new products and innovations that could be considered for regulation in the future.