Reuters — Canopy Growth Corp. said Thursday it will buy rival Supreme Cannabis for $323.3 million, as the world’s biggest cannabis producer bolsters its portfolio to tap surging demand.

Shares of Canopy, up 15 per cent this year, fell around 4.6 per cent to $36 after it announced the cash-and-stock deal for Supreme, which owns pot brands including 7Acres, Blissco and Sugarleaf. Shares of Toronto-based Supreme surged 50 per cent, to 40 cents.

The opening of more retail stores and a rise in weed use during the pandemic has brought back investor dollars for cannabis producers after years of underperformance. Hopes of U.S. reforms allowing cross-border commerce are also boosting investments in the sector.

Smiths Falls, Ont.-based Canopy will continue to push for a higher share of the Canadian market while it prepares for a U.S. entry, CEO David Klein told Reuters.

“We’re a Canadian company… we’re going to use Canada as that kind of solid home base for us to be able to then bring our capabilities and our brands into the U.S. market as it opens,” Klein said in an interview.

He also reiterated that the company is on track to turn profitable on an adjusted basis this year.

The Supreme deal makes Canopy the owner of four out of the top 10 cannabis brands in Canada, with an estimated 13.6 per cent of the total recreational market share in the country, the companies said.

The deal would give Canopy control of Supreme’s 440,000-square foot cannabis cultivation facility at Kincardine in western Ontario and a West Coast extraction and processing plant at Langley, B.C.

Under the deal’s terms, Supreme Cannabis shareholders will receive 0.01165872 of a Canopy common share and 0.01 cents in cash in exchange for each Supreme Cannabis share held.

Including debt, the deal is valued at $435 million. The two companies said they expect to close their deal by the end of June, pending the usual approvals such as from shareholders and regulators.

— Reporting for Reuters by Arunima Kumar and Shariq Khan in Bangalore. Includes files from Glacier FarmMedia Network staff.