Bruce Linton has been the cannabis industry’s busiest and flashiest dealmaker. In the end, his biggest deal was his undoing.
The co-chief executive and chairman of Canopy Growth Corp., who was instrumental in building the Smiths Falls, Ont.-based grower and marketer into a global pot juggernaut, was handed his walking papers by the same U.S. consumer-products giant he brought in as a major shareholder.
For its $5-billion investment in Canopy last year, Constellation Brands Inc. was promised that the board and management would get a refresh to help boost Canopy’s legitimacy as the walls of illegality fall in countries around the world – especially in the United States. For its 38-per-cent stake in the company, Constellation controls four of the seven board seats.
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Mr. Linton has been the public face of Canopy, its Tweed brand and even Canada’s entire cannabis industry, which he has promoted with evangelical zeal. Bringing in such celebrity ambassadors as Snoop Dogg and Seth Rogen, he has presided over the company as its market value climbed to as much as $22-billion from virtually nothing over five years. Not long ago, he even mused publicly about eventually becoming Constellation’s chairman.
That’s why it came as a surprise, according to Mr. Linton, when he found out Tuesday – at a board meeting he did not call – that the refresh meant his departure.
The plain-talking executive suggested that he and Constellation agree that his value is more as a company builder, having made more than a dozen sizable acquisitions at Canopy, than a company runner. In fact, Canopy is close to finalizing its latest deal, the US$300-million down payment on Acreage Holdings, the U.S. cannabis company for which it will eventually pay US$3.4-billion, assuming laws in the United States change.
Such is the curse of the mercurial deal guy.
“This is a global new thing that is positioned for growth and has a ton of cash; this is a rocket ship fueled up and moving and all you have to do is hold on,” Mr. Linton told The Globe and Mail on Wednesday. “I have done nothing but work on this for six and a half years, so it does make me feel a little chagrined, but that is what you have to do as an entrepreneur. I detach my personal desire from my desires for the company.”
It’s a tough position to be in when a sizable chunk of the operation is owned by another company that’s seeking to put cannabis products alongside its stable of popular alcoholic brands, including Kim Crawford wines and Corona beer. Meanwhile, Constellation is not seeing the financial picture it had hoped for.
Indeed, last week, Constellation CEO Bill Newlands said he was “not pleased” with Canopy’s fourth-quarter results, which were marred by a net loss that was four times worse than what analysts had expected. Canopy’s $323-million of red ink hit Constellation’s own earnings by US$106-million. Meanwhile, Canopy warned that the next quarterly showing would show little improvement. The shares have fallen 26 per cent since late April.
With recreational cannabis still criminalized at the federal level in the United States, Constellation has every reason to ensure that the industry’s most prominent company is running as smoothly and predictably as any other publicly traded corporation as it gauges the prospects for legalization in what would be its largest market.
Constellation’s investments in Canopy in recent years showed it was eager to establish a beachhead in an industry that had grown in Canada in rough-and-tumble fashion but whose products had the potential to take their place among well-known consumer brands. Now that the industry is maturing, it’s clear Constellation expects a management style that’s a little less freewheeling.
Jeffrey Jones