Canopy Growth Corp. is adding another piece to its future U.S. empire, announcing plans Wednesday to buy cannabis concentrate maker Jetty Extracts with a US$69-million call option. 

The deal, similar in structure to previous announcements for multi-state operator Acreage Holdings Inc. and edibles giant Wana Brands, positions Canopy to become one of the biggest cannabis companies in the U.S. — but only once the country legalizes cannabis. 

"Canopy Growth is building a house of premium cannabis brands with a focus on the core growth categories that will power the market’s path forward, now including Jetty — a pioneer of solventless vapes," said David Klein, chief executive officer at Canopy Growth, in a statement. 

Canopy structured the deal through two call options, the first of which will pay US$69 million in cash and stock for 75 per cent of Jetty's parent company (Lemurian Inc.) with a second option to acquire the remaining stake. Until those options are exercised, the two companies will continue to operate independently to abide by federal laws and exchange restrictions. 

Canadian companies like Canopy, Tilray Brands Inc., and Cronos Group Inc. that have focused their interest on the U.S.'s cannabis market — currently valued at US$25 billion, according to Leafly — can't formally acquire any American pot companies because the stock exchanges they are listed on forbid businesses to engage in illegal activities. Cannabis remains federally illegal in the U.S. despite being available in 39 states for medical sales and 18 states for recreational use.  

Buying Jetty would be one of Canopy's smallest U.S. deals and the announcement Wednesday was made at a time when capital has been hard to come by for many cannabis companies, especially those operating in highly-taxed states like California. Canopy has reported $2.05 billion in cash and marketable securities on its balance sheet, with about US$1.2 billion already earmarked for the trio of Jetty, Acreage, and Wana. It also has a 16 per cent stake in TerrAscend Corp., which operates in California and three other states. 

Jetty makes concentrated cannabis products through solventless extraction, a process that extracts cannabinoids using just heat, pressure, ice or water and no chemicals. These products are believed by consumers to be a purer, cleaner form of consuming marijuana that also maintains the plant's natural terpenes, the essential oils that give cannabis different taste profiles. 

In closely-held Jetty, Canopy is adding a company that is already generating positive earnings before interest, taxes, depreciation, and amortization; and maintains a top-five share position in California's vape market, according to the company's release. While Canopy didn't disclose Jetty's revenue in its announcement Wednesday, concentrate sales in five U.S. states including California reached US$797 million in 2020, an increase of 40 per cent from the prior year, according to data analytics firm Headset. 

"There are significant opportunities for Jetty to scale at the state-level across the U.S. by leveraging Canopy’s U.S. ecosystem, and we’re actively working on plans to bring the brand to the Canadian recreational market," Klein said.