Cannabis stocks rally on Canopy Growth’s $425M purchase of US hemp researcher

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Canopy Growth announced a deal to acquire Colorado-based hemp researcher Ebbu for $425-million 

Cannabis stocks rallied Monday on news of Canopy Growth latest acquisition deal. The company told investors it has agreed to purchase the United States hemp researcher Ebbu. Canopy says the company will complement and accelerate their work in developing more consumer products.

According to CNBC, the deal includes 6,221,210 common shares of Canopy Growth Corp TSE: WEED and CAD$25 million in exchange for Ebbu and its assets.

In a press release, Canopy Growth discussed the benefits of acquiring Ebbu’s intellectual property and research. Canopy believes it can be directly applied to boost their hemp and THC-rich cannabis breeding programs.

Ebbu’s research specialty is the purification of cannabinoids that can be developed in consumer products. One of Ebbu’s biggest boasts is its use of patented plant genetics. On its website, the company claims to have experience in boosting the cannabinoid production of plants.

Cowen analyst Vivien Azer said the deal could lead to strong revenue growth for Canopy by helping them enhance the productivity of their plants and cut operating costs. It fits with Canopy’s current hemp grow operation in Saskatchewan, said Azner.

In terms of the end result for consumers, Azner said the company anticipates lower prices on cannabidiol (CBD) oil due to its ability to ramp up production. CBD oil is currently Canopy’s leading product. Azner also noted that the deal marks Canopy’s first entry into U.S. based operations.

Following the announcement, Canopy Growth shares rose nine percent. Other marijuana stocks, including Tilray Inc NASDAQ: TLRY and Aurora Cannabis Inc TSE: ACB, rose as well – 7.1 percent and 7.5 percent, respectively.