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A mairjuana plant in Edmonton, Alberta, Canada. Photo by Artur Widak/NurPhoto via Getty Images

Canadian cannabis company Canopy Growth, which is 38% owned by beer and spirits company Constellation Brands, bought the right to acquire Acreage Holdings only if recreational marijuana is legalized in the U.S.

The big picture: The tie-up between the U.S. company that grows and sells pot in a handful of states — former Speaker of the House John Boehner is on the board — and the world’s most valuable pot company is essentially a bet on the future that’s valued at $3.4 billion dollars.

Between the lines: The non-deal deal is structured to avoid obstacles that would come with Canopy’s outright acquisition of Acreage before legalization. A deal now would get Canopy’s shares de-listed from the Toronto and New York Stock Exchange, which both forbid listing companies with U.S. cannabis operations since it’s federally illegal. (Canada made marijuana fully legal nationwide in October.)

  • “This is like a very large game of double dutch, as in ‘if the rules change we'll come play, but until then we'll keep spinning those ropes.’ It's a waiting match,” Brent Williams, founder of Highwater Financial, a cannabis-focused investment firm, tells Axios.
  • “It’s a great precedent to set for the Aurora Cannabis's of the world to come in for further expansion of Canadian companies into the U.S.”

How it works: The deal is terminated if cannabis is not legalized (or if exchanges don't change their rules) within 7.5 years, or 90 months. If the deal falls through, no word on what happens to the $300 million upfront cash Canopy agreed to pay Acreage shareholders.

  • But the heads of both companies and many analysts are optimistic legislation will pass within the next 2 or 3 years.
  • The companies said the deal value was a 41% premium over Acreage's share price.

What’s in it for the companies:

  • “Canopy has been at risk of missing out on the U.S. market as it grows. Now they have sort of secured a path towards that, while avoiding an outright acquisition today," Rob Wertheimer, a founding partner of Melius Research, tells Axios. “Acreage is attached to what has become an emerging North American leader and that’s well-positioned for growth.”

The bottom line: This just built a path for companies to buy into a budding U.S. marijuana market without breaking any laws and without facing the wrath of stock exchanges. Analysts say the deal structure could set off a wave of similar transactions.

Go deeper: 4/20 sells high: Corporate America embraces marijuana's big day

Go deeper

34 mins ago - Politics & Policy

Senate retirements could attract GOP troublemakers

Sen. Roy Blunt (R-Mo.). Photo: Jim Lo Scalzo/EPA/Bloomberg via Getty Images

Sen. Roy Blunt's retirement highlights the twin challenge facing Senate Republicans: finding good replacement candidates and avoiding a pathway for potential troublemakers to join their ranks.

Why it matters: While the midterm elections are supposed to be a boon to the party out of power, the recent run of retirements — which may not be over — is upending that assumption for the GOP in 2022.

Congressional diversity growing - slowly

Data: Brookings Institution and Pew Research Center; Note: No data on Native Americans in Congress before the 107th Congress; Chart: Danielle Alberti/Axios

The number of non-white senators and House members in the 535-seat Congress has been growing steadily in the past several decades — but representation largely lags behind the overall U.S. population.

Why it matters: Non-whites find it harder to break into the power system because of structural barriers such as the need to quit a job to campaign full time for office, as Axios reported in its latest Hard Truths Deep Dive.

Staff for retiring Senate Republicans a K Street prize

Illustration: Eniola Odetunde/Axios

The retirements of high-profile Senate Republicans mean a lot of experienced staffers will soon be seeking new jobs, and Washington lobbying and public affairs firms are eyeing a potential glut of top-notch talent.

Why it matters: Roy Blunt is the fifth Republican dealmaker in the Senate to announce his retirement next year. Staffers left behind who can navigate the upper chamber of Congress will be gold for the city’s influence industry.