Canopy Growth Moves into Sports with BioSteel Deal

Canopy Growth (NYSE:CGC,TSX:WEED) is positioning itself to take on the cannabidiol (CBD)-infused sport nutrition industry.

The Canadian cannabis giant confirmed on Wednesday (October 2) that it has completed a majority stake purchase of BioSteel Sports Nutrition, a producer of sport and hydration supplements.

The all-cash transaction gives the Ontario-based cannabis producer a 72 percent stake in BioSteel, with the understanding that Canopy Growth will move toward full ownership later in the future. The financial terms of the deal have not yet been disclosed.

The company said the deal “lays the groundwork” for future CBD-infused product offerings in the sport food and hydration sectors in the US, using federally permissible CBD sourced from hemp.

Paradigm Capital and McCarthy Tétrault acted as BioSteel’s financial advisor and legal counsel, respectively, during the transaction.

Canopy Growth CEO Mark Zekulin said in a statement that the transaction will help further the company’s goal of moving into the CBD food and beverage space.

“We view the adoption of CBD in future BioSteel offerings as a potentially significant and disruptive growth driver for our business,” he said.

In a TSN interview, Zekulin said the company could offer CBD-infused sports drinks as soon as next year.

The deal will also give Canopy Growth an entry point into the global sport nutrition market, which is expected to reach US$24.4 billion by 2025, according to data from Grand View Research.

On the CBD front in the US, the firm received a New York hemp license at the beginning of the year, and in July, the company unveiled its hemp processing plant in the state. Canopy Growth is also developing a line of CBD products with television personality Martha Stewart, to be released in mid-2020.

For its part, BioSteel offers a selection of hydration drinks, protein powders and other products to athletes in professional sports, and has over 10,000 points of distribution in Canada and the US. BioSteel also has plans to break into the European market.

Since its founding in 2009, BioSteel’s products have been bought by more than 70 percent of the teams in North America’s four major leagues.

The Toronto-based sport nutrition company is bringing with it sponsorships from professional athlete standouts, including Dallas Cowboys running back Ezekiel Elliott, Connor McDavid of the Edmonton Oilers, pro golfer Eugenie Bouchard and National Hockey League (NHL) hall-of-famer Wayne Gretzky.

As a part of the transaction, former NHL star and BioSteel co-founder Michael Cammalleri will assume the full-time role of co-CEO alongside sport nutrition executive John Celenza, according to TSN.

In a statement, Celenza noted that the deal will help BioSteel expand its global distribution while enhancing its current product portfolio.

“The consumer market and many of our athletes have a growing knowledge of cannabis and CBD products and this partnership ensures that we will continue to raise the bar in the sports nutrition field.”

Canopy Growth’s share price opened at C$27.98 on Wednesday and, as of 12:40 p.m. EDT, the company sat at C$28.69, an increase of 2.5 percent in value.

Earlier this year, the cannabis firm paired up with the NHL Alumni Association to research the effect of cannabinoids on post-concussion neurological diseases in former hockey players.

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.