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HIGHLIGHTS
  1. Couche-Tarde to buy controlling stake in Fire and Flower for $380-million over 36 months
  2. Fire and Flower conditionally approved to list shares on Toronto Stock Exchange
  3. Fire and Flower eyes Mexico, New Zealand and Australia for possible initial expansion, pending legalization

Canada’s biggest convenience store operator will pay $380-million over three years for a controlling stake in one of the country’s largest cannabis retail chains, marking the largest strategic investment with a Canadian marijuana seller, Fire and Flower Holdings Corp. said on Wednesday.

Alimentation Couche-Tarde Inc. – parent company of Circle K and Mac’s convenience stores – will buy 50.1 per cent stake in Edmonton, Alta.-based Fire and Flower over 36 months, the adult-use cannabis store said.

This will position Fire and Flower to expand internationally if other countries legalize recreational cannabis, which is widely expected within the next several years.

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Couche-Tarde said on Wednesday that it has invested nearly $26-million into Fire and Flower using convertible debentures, a type of debt, that bear 8-per-cent interest. If the debentures are converted at $1.07, Laval, Que.-based Couche-Tarde will gain a 9.9-per-cent ownership stake in Fire and Flower.

Within three years, Couche-Tarde will pay a total of $380-million for 50.1 per cent ownership of the cannabis retailer, Fire and Flower said.

“For us it made a lot of sense to have that higher sense of alignment so we’re effectively moving in line to become one company ultimately,” said Trevor Fencott, chief executive of Fire and Flower, adding that Couche-Tarde chose a path toward a controlling stake that provides capital in predictable increments over the next three years.

“The most important thing was being able to leverage their vast global experience. We want to grow into other markets as they mature.”

Couche-Tarde operates more than 16,000 stores in 25 countries.

“That kind of global infrastructure is going to be invaluable to us,” Mr. Fencott said.

The marijuana retailer, which currently has 24 licensed cannabis stores in Canada and aims for a total of 45 by January 2020, has its eye on possibly expanding first into Mexico, New Zealand and Australia, where there is the potential for adult-use marijuana to be legalized as early as 2020.

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Other countries on Fire and Flower’s radar are South Africa, some in Europe and then the United States, dependent on federal legalization.

“[The investment] allows us to aggressively grow and capture significant market share, not just in Canada but beyond, very quickly,” Mr. Fencott said.

Fire and Flower has been conditionally approved to list its shares on the Toronto Stock Exchange, the retail chain said. It currently trades on the TSX Venture Exchange.

It will be the first solely recreational cannabis retailer to trade on the Toronto Stock Exchange.

The deal comes five months after Couche-Tarde joined forces with Canopy Growth Corp. in a multi-year agreement in which Couche-Tard made a trademark licence agreement with an Ontario retail cannabis lottery winner to open a location with Canopy’s “Tweed” brand.

Canopy, Couche-Tard team up to sell recreational cannabis in Ontario

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