Canopy Growth ending joint pot venture with Drake
Drake's plan to become a global cannabis mogul may be in doubt after his deal with Canopy Growth Corp. abruptly came to an end earlier this year, according to new information.
Canopy said in a regulatory filing Tuesday that it has ended its partnership with Drake's More Life Growth Company ULC to sell cannabis in the Canadian and global markets. Canopy didn't immediately provide a reason why the two dissolved their partnership.
"We have indeed divested from More Life and the facility in Scarborough which had been intended to be part of that agreement is now Canopy Growth's R&D facility, where we will work on plant science and science development projects," a Canopy spokesperson said in an emailed statement.
A representative from Drake's management team wasn't immediately available for comment.
Canopy and Drake announced in November 2019 the launch of More Life, a joint venture to sell recreational cannabis and accessories in Canada and abroad. As part of the deal between the two, Canopy agreed to flip a Scarborough, Ont.-based cannabis cultivation facility to More Life in exchange for 40 per cent of the venture's equity, leaving Drake with a controlling share.
The deal, brokered with former Canopy boss Bruce Linton, was a high-profile partnership at the time that aligned with the pot giant's penchant for tying up with a variety of celebrities such as Snoop Dogg, lifestyle guru Martha Stewart, and comedian Seth Rogen who had some tangential ties to cannabis culture.
However, roughly a year after the two announced the More Life deal, Canopy disclosed it took a $32.7-million impairment charge in fiscal 2020 as part of its plan to restructure its global operations.
Canopy Chief Executive Officer David Klein told BNN Bloomberg last August that the company’s arrangement with Drake's More Life wasn't "progressing as originally intended" but said the two parties were still working on details to salvage the partnership.
"It may be something that can't get to where we all want it to go," Klein said at the time. "In many regards, at its essence, it's almost a real estate play where More Life is going to do a lot of activity on cannabis destinations. I don't know if that still fits anybody's way of thinking, at least in the COVID world."
In the filing Tuesday, Canopy said it took an additional $10.3-million impairment charge on its venture with Drake in its most recent fiscal year, representing roughly one-quarter of the company's total impairments in that period. Canopy said it terminated its deal with Drake as of the end of March, and it "derecognized the remaining minimum royalty obligations owing to More Life" of roughly $33.7 million.
Canopy has had a mixed track record with its celebrity pacts: the Leafs By Snoop brand with Snoop Dogg has just a handful of products in the Canadian market, and its partnership with Rogen's Houseplant brand has seen some success with infused beverages. Canopy recently announced it expanded Stewart's advisory role with the company following a successful launch of CBD gummies in the U.S. last year.
It is unknown whether Drake still has plans to continue his More Life cannabis venture in the U.S. market, where Rogen has also found some early success promoting his Houseplant brand in California. According to U.S. data, More Life still has an active trademark for various cannabis and hemp products as well as marijuana-related clothing and accessories.