Former Canadian leader joins US cannabis group as rules shift

FT Mulroney.jpg

Board role at Acreage comes as Canadian liberalization lifts hope for market growth

Source: The Financial Times, Andrew Edgecliff-Johnson 

Brian Mulroney, Canada’s former conservative prime minister, has been appointed to the board of a US cannabis company on the eve of Canada becoming only the second country after Uruguay to legalise recreational marijuana. 

Mr Mulroney will join the board of Acreage Holdings, which raised $119m in July and has announced plans to join the rush of cannabis companies going public in Canada. He told the Financial Times he had been encouraged to do so by Acreage directors John Boehner, the former speaker of the US House of Representatives, and William Weld, the former governor of Massachusetts. 

The news comes as Canada’s legalisation of recreational marijuana, agreed by Justin Trudeau’s government in June, takes effect on Wednesday, making Canada the first country in the G7 to take such a step. 

“I think the Canadian leadership position on this will be quite widely admired around the world,” Mr Mulroney said. Cannabis “meets a need, both a medical need and a social need,” he added. He had not taken “a hard and fast position” on the cannabis debate while in office, he said, but he had since been persuaded about the drug’s medicinal value for treating veterans with PTSD and opioid addicts. 

$5.7bn Canadian spending on cannabis — or a quarter as much is spent on alcohol Canada’s liberalisation is expected to create one of the largest legal markets for cannabis products to date. Almost 5m Canadians between the ages of 15 and 64 spent $5.7bn on cannabis last year, according to Statistics Canada.

Mr Mulroney became prime minister in 1984, negotiating Nafta and ushering in a series of privatisations and deregulatory measures. Since leaving office in 1993 he has served on the boards of Blackstone, Quebecor and Wyndham Worldwide. 

Mr Mulroney, 79, will take up his position on Acreage’s board on completion of a reverse takeover it announced last month that will give it a listing on the Canadian Securities Exchange. According to the CSE’s website, more than 35 cannabis companies have gone public on the exchange this year, bringing the total to more than 100. 

One US cannabis company, Terra Tech, took out a full-page US newspaper advertisement this week, warning President Donald Trump that the US was “rapidly losing its competitive advantage” in the industry to Canada and saying that US restrictions were driving companies to Canadian capital markets.

Kevin Murphy, Acreage’s founder and chief executive, echoed those concerns, saying it was “unfortunate” that a US cannabis operator had “to go north to access the capital markets”. 

Acreage, based in New York, owns and operates cultivation, processing and dispensing operations. It has licences in 14 US states where medical or recreational cannabis use has been legalised and expects to have 21 US dispensaries open by the end of the year. 

It publishes no revenue or profit data but Mr Murphy said it was seeing “explosive growth” across the US. To date, nine US states and the District of Columbia have legalised recreational cannabis sales. In Canada, the federal government has allowed provinces to determine how cannabis may be sold, resulting in a patchwork of private and government-run retailers with different rules on online sales and where consumers may smoke the drug.

More than 90 per cent of cannabis consumption in Canada is already for non-medical purposes. Even though the price has been falling, Canadians spend more than a third as much on cannabis as they do on tobacco, or almost a quarter as much as they do on alcohol. 

The spreading legalisation of cannabis has propelled cannabis stocks and awakened interest from consumer goods brands. Tilray, a lossmaking Canadian cannabis producer, touched a $20bn valuation last month, and Canopy Growth is valued above $15bn after Constellation Brands, the maker of Corona Beer, invested almost $4bn to lift its stake to 38 per cent. The rising share prices have given listed cannabis companies a currency with which to start consolidating the fragmented industry. This week Canopy struck a $425m cash-and-stock deal to buy Ebbu, a hemp researcher based in Colorado.

In the newsJennifer Park