Canopy Growth announced Monday that David Klein has been hired as the company’s new CEO, effective Jan. 14, 2020.

As previously announced, interim CEO Mark Zekulin will resign from the position and also from his seat on the company’s board of directors, effective Dec. 20.

“It has truly been an honor to be part of building a unique, Canadian success story like Canopy, and I look forward to seeing the company continue to evolve and grow under David’s leadership,” Zekulin said.

David Klein

Klein has sharpened his leadership skills for the last 14 years at Constellation Brands, covering CPG and beverage alcohol industries. Currently, he’s an executive vice president and CFO at Constellation Brands. The company said Klein will resign from those positions, only remaining a member of the Canopy board.

Over the last two years, Constellation Brands has invested over $4 billion in Canopy Growth.

“I look forward to working with the team to build on the foundation that has been laid, to develop brands that strongly resonate with consumers, and to capture the market opportunity before us. Together we will drive sustainable, industry-leading growth that benefits employees, shareholders and the communities in which we operate,” Klein said.

Bid on Equity

Canopy Growth shares jumped Monday when the company announced the appointment of Klein as CEO.

Cantor Fitzgerald’s Pablo Zuanic reiterated a “neutral” rating on Canopy Growth with a CA$18.90 ($14.27) price target.

Zuanic was surprised it has taken this long for Canopy Growth to hire a new CEO after Bruce Linton’s departure, according to a Monday note. (See his track record here.)

“Pundits trying to read the tea leaves could make arguments both pro and con regarding whether the probability of a bid by STZ (Constellation Brands) has increased or not,” the analyst said.

Those chances have increased, he said, explaining there is a more than a two-thirds probability of Constellation Brands putting in a bid for all Canopy Growth’s equity very soon, he said.

On the other hand, Zuanic said that acquiring Canopy Growth can’t be an easy strategic decision for Constellation Brands given “its own balance sheet, (~4x net debt to EBITDA on FY21 consensus), likely mid- to high-teens EPS dilution from a deal for the 65% of WEED it does not own, and likely near-term hit to its own share price.”

Constellation Brands could advocate for acquisition on the argument of an improving outlook for the cannabis industry, and also if it sees Canopy Growth as a strategic investment and not just a financial one, the analyst said.

The THC/CBD beverages being created jointly by the two companies could push them ahead of the competition, both in Canada and globally, Zuanic said.

“We rate the stock neutral as we are not entirely convinced the premium is justified (taking last quarter sales) and think consensus may be too optimistic for [calendar year 2020] in relative terms.”

These stories originally appeared on Benzinga. 

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Photo source: CNW Group/Canopy Growth Corporation

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