Canopy Makes Play for African Market Through Highlands Acquisition

Canopy Growth Corporation (WEED) is staking a claim in the African medical cannabis market. On May 30, 2018, the company announced that it has acquired Daddy Cann Lesotho PTY Ltd., which trades under the name Highlands.

“We’re excited to join the Canopy Growth family and bring together our strong entrepreneurial experience and local knowledge in the region with Canopy Growth’s track record and quality standards in the global medical cannabis industry,” said Highlands founder Jody Aufrichtig. “Lesotho and Southern Africa have enormous potential and we look forward to building a responsible medical cannabis business across the region.”

Highlands is located in the Kingdom of Lesotho, which recently legalized medical cannabis in 2017. Geographically surrounded by South Africa, Lesotho is part of what is known as the “Dagga Belt,” which is a region known for its prolific cannabis production. Dagga is a term used in South Africa for cannabis. Under the agreement, Canopy will issue a total of 999,643 shares of the company to Highlands’ sole shareholder, at a price of approximately $28.76 per share. The sum value of the deal is estimated to be approximately $28.8 million.

Licensed for the production, manufacturing, import, and export of medical cannabis; Canopy hopes to use Highlands to gain a strategic foothold on the African continent. This strategy is in line with a recent analysis by BMO Capital Markets, which found that Canopy was strategically positioned itself in the global market by setting up operations in international”hub regions”, like Denmark or Lesotho,  with the anticipation that larger markets would soon open up.

According to a United Nations report, approximately 25% of the world’s cannabis is produced in Africa, with roughly 42% of all of the cannabis grown in Africa coming from the South African region. Approximately 38.2 million Africans, or 7.7% of the adult population, use cannabis on a daily basis.

Although Zimbabwe is the only other African nation to legalize medical cannabis, the legalization has made some progress over the last several years. Most recently, South African’s Western Cape High Court ruled that banning personal cannabis use and cultivation is unconstitutional, effectively decriminalizing cannabis in the region and paving the way for wider legalization.

Canopy is not the only cannabis company with interest in Africa. Only a handful of days before Canopy made its announcement, Aphria (APH) broke the news that it would form a joint venture with the Lesotho-based company Verve Group of Companies, dubbed CannInvest Africa Ltd.

William Sumner

William Sumner is a freelance writer specializing in the legal cannabis industry. You can follow William on Twitter @W_Sumner or on Medium.

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