(Reuters) - Constellation Brands Inc STZ.N finance head David Klein will take over in January as chief executive officer of pot producer Canopy Growth Corp WEED.TO, hardening up the Corona beer maker's control of a company into which it has sunk $4 billion.
Klein was appointed Canopy chairman in October after Constellation booked a $430 million net loss related to the company. He replaces Mark Zekulin, who became the company’s sole head after co-CEO Bruce Linton resigned in July.
Linton had said that he was fired from the top job, days after Constellation expressed its disappointment over Canopy’s 2018 results.
Canopy’s U.S.-listed shares rose 4.5% to $19.49 in trading before the bell, while Constellation shares were little changed.
“The appointment of David Klein as CEO of Canopy is disappointing only in the sense that Canopy loses any remaining perceived independence as a global cannabis company,” Seaport Global analyst Brett Hundley said.
“It is now clear to us that Canopy will be managed as a Constellation subsidiary.”
Constellation Brands bought into Canopy’s shares and warrants in 2017, betting on the proposed legalization of recreational weed in several countries.
However, Canada's new brand of pot producers have all struggled to deliver in the first year of the legalization and shares in most have sunk since March. An ETF tracking Cannabis stocks MJ.P has lost more than half its value since then.
Compass Point LLC analyst Rommel Dionisio called the move “very telling”, considering Klein’s background that included cost controls, margin improvements and acquisition discipline.
With Klein’s appointment, the top two executives at Canopy are from Constellation. Canopy’s finance chief, Mike Lee, was previously senior vice president and CFO for Constellation’s Wine & Spirits unit.
Earlier in the day, Cantor Fitzgerald analyst Pablo Zuanic said in a note that there was more than a two-thirds probability to Constellation putting in a bid for Canopy in the near term.
Constellation said in October that it was “pleased with the progress of the Canopy team and what they have done in the last few months.”
Separately, Constellation said on Monday Senior Vice President Garth Hankinson will take over Klein’s role at the company.
Reporting by Shanti S Nair, Shariq Khan and Nivedita Balu in Bengaluru; Editing by Anil D’Silva
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