Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) is selling its Hershey Drive facility in Smiths Falls, Ontario, as part of its move to become a simplified, asset-light operating model. Canopy Growth said it will retain its Smiths Falls-based post-harvest manufacturing facility. The facility will be sold to Hershey Canada, Inc. for cash consideration of approximately C$53 million.
So far, Canopy Growth has sold a total of seven properties for an aggregate gross amount of approximately C$155 million since April 1, 2023. The company said that net proceeds from the sale of the facility will be used primarily to pay down its senior secured credit facility.
“We are pleased to have reached an agreement with Hershey on this important sale. This is the latest milestone in our focused effort to reduce costs and further enhance our balance sheet,” said David Klein, Chief Executive Officer of Canopy Growth. “Each of the steps we have taken as part of our transformation to a simplified, asset-light operating model supports our ability to deliver in-demand products from brands our customers love, with greater agility and less execution risk. ”
Canopy Growth announced in February that it was closing the facility. The company swelled as it built massive cultivation operations and loaded up on debt, only to decide to dump all the growing facilities it spent millions creating. Canopy decided to exit cannabis flower cultivation in its Smiths Falls, Ontario, facility, ceasing the sourcing of cannabis flower from the Mirabel, Quebec, facility, and moving to a third-party sourcing model for cannabis beverages, edibles, vapes, and extracts.
The changes were in addition to multiple cost reduction activities planned for the year, including the divestiture of Canopy Growth’s Canadian retail operations, the organizational restructuring of certain corporate functions, and the closure of the Scarborough, Ontario, research facility.
The sale of the facility follows the centralization of post-harvest manufacturing at the company’s former beverage facility in Smiths Falls and the consolidation of all flower cultivation in the company’s purpose-built sites in Kincardine, Ontario, and Kelowna, British Columbia.
“Our intent to purchase the Hershey Drive property in Smiths Falls is another example of the strategic investments we’re making in our supply chain network and our Canadian operations to support growth,” said Jason Reiman, Chief Supply Chain Officer, The Hershey Company.
In 2017, Canopy Growth closed on the acquisition of the property at 1 Hershey Drive that housed Canopy Growth’s headquarters and the Tweed Inc. (Tweed) production facilities. The building, property, and chattels were acquired for C$6.6 million.
At the time, CEO Bruce Linton said, “The future looks bright for Tweed and Canopy Growth’s operations in this facility. It might even be time to reopen the famous Visitor Centre and start training tour guides.”