The move by the maker of Corona beer and Svedka vodka comes as Canada and a growing number of U.S. states move to legalize marijuana for recreational use, raising question marks over its illegal status at the U.S. federal level.

Constellation said it had no plans to market cannabis or lobby for its legalization in the U.S. in the near future and analysts said the relatively small stake would allow it to take advantage of any future boom — or to exit if one does not materialize.

“One of the hallmarks of our success over the years has been our commitment to identify and stay ahead of early stage consumer trends,” the company said in a statement on the deal.

“This is another step in that direction,” it added.

Eight states, including California and Nevada, have legalized marijuana, already widely approved for medicinal use, for recreational use and some studies show consumers would buy the drug instead of alcohol if it was freely available.

A number of pharmaceutical companies have products that are cannabis derivatives and smaller investors have poured money into Canadian producers this year: the index of Canadian marijuana stocks calculated by research house Canaccord Genuity rose 36 per cent in the month to Oct. 11.

But major firms in other sectors have kept their distance, worried by the connotations of involvement with a banned substance.

“We’re obviously trying to get first-mover advantage,” Constellation CEO Rob Sands told the Wall Street Journal, adding that he expects cannabis to be legalized nationwide in the U.S. in coming years.

Threat

Eight Capital analyst Daniel Pearlstein said that the move validated the cannabis industry as both a threat and opportunity for larger established companies in industries including alcohol and tobacco.

“This move is a complete game changer, not only for Canopy, but also for the entire industry,” he said.

Vivien Azer, an analyst at brokerage Cowen, said that data showed 18-25 year olds — a key market for spirit makers — perceived alcohol as increasingly risky compared with cannabis, for which risk perceptions have halved in a decade.

Industry watchers also say cannabis consumers have reduced their alcohol intake in U.S. states following legalization.

“We were … able to show in our research in Colorado, Washington and Oregon that there has been a negative impact in alcohol consumption … post the legalization of adult-use cannabis,” Azer said.

Analysts said a more immediate option for Constellation could be to develop non-alcoholic cannabis-infused beverages for the Canadian cannabis market, which consultants estimate could be worth around $5 billion to $10 billion.

The deal also comes ahead of the widely anticipated move by Canada, to legalize cannabis for recreational use nationwide by July 2018. The following year, edible and drinkable products are expected to become legal.

Canopy Growth is the biggest licensed producer of medical marijuana in Canada and is publicly traded (TSX: WEED) a market capitalization of $2.2 billion.

Constellation said the deal also gives it the option to purchase an additional ownership interest in Canopy in the future.

The two companies said Monday they also plan to enter into an agreement to “exchange knowledge and expertise.”

— Reporting for Reuters by Siddharth Cavale and Gayathree Ganesan; additional reporting by Ankur Banerjee and Manas Mishra in Bangalore. Includes files from AGCanada.com Network staff.

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JAB, the investment vehicle of Germany’s billionaire Reimann family, has built up an empire of coffee and food chains through a series of acquisitions in recent years, including that of K-cup coffee pod-maker Keurig Green Mountain Inc.

Panera has about 2,000 bakery cafes in the U.S., plus a handful of Canadian outlets in southern Ontario, and its fresh offerings are meant to appeal to health-conscious consumers. It has been ramping up its loyalty program, rolling out kiosks to cut customers’ waiting times and has expanding its delivery service.

Shares of St. Louis-based Panera jumped 14.2 per cent to a record high of $312.98 (all figures US$). JAB offered $315 per share in cash, a 20.3 per cent premium to the stock’s closing price on March 31, the last trading day before media reports of a potential deal.

“We view the acquisition as strategically compelling for JAB… we view the acquisition price as high enough to preclude a competing financial suitor,” Wedbush Securities analyst Nick Setyan said in a note.

Setyan said JAB’s offer was largely in-line with multiples it has paid for its acquisitions, including Peet’s Coffee + Tea and Caribou Coffee.

The acquisition of Panera will be the second-biggest restaurant deal in North America after Burger King’s $11.53 billion purchase of Canadian coffee chain Tim Hortons, according to S+P Global Market Intelligence.

Panera has reported better-than-expected earnings per share for the last six quarters. On Wednesday, it reported preliminary first-quarter company-owned sales-store growth of 5.3 per cent, which Setyan said comfortably beat Wall Street’s expectations.

BTIG analyst Peter Saleh told Reuters the deal would give Panera the flexibility to “invest more in technology, maybe to invest faster behind delivery, to make more investments in their food offering.”

JAB became the world’s largest pure-play coffee maker by volume in 2015, when it created the Jacobs Douwe Egberts joint venture by combining its D.E. Master Blenders 1753 business with the coffee business of Mondelez International.

JAB will also assume about $340 million of Panera’s net debt, valuing the deal at $7.5 billion, the companies said in a joint statement. They expect the deal to close in the third quarter.

Panera founder and CEO Ron Shaich and entities affiliated to him have agreed to vote shares representing about 15.5 per cent of the company’s voting power in favor of the deal.

— Reporting for Reuters by Anya George Tharakan and Gayathree Ganesan in Bangalore.

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Mars plans to combine Wrigley with its chocolate business, putting M+Ms, Snickers, Skittles, Lifesavers, Starburst fruit chews, Doublemint and Extra gum and Altoids mints under one roof.

In 2008, Berkshire invested in Wrigley when it acquired $2.1 billion of preferred stock and $4.4 billion of bonds in connection with privately held Mars’ $23 billion purchase of the chewing gum maker (all figures US$).

The bonds were repurchased in 2013, and Berkshire expected Mars to redeem half of the preferred stock, which carries a five per cent dividend, by early January. Mars will instead redeem all of it. Terms were not disclosed.

“I have enjoyed all of Berkshire’s experiences with the Mars family and management and wish them the very best,” Buffett said in a statement. “Both Mars and Berkshire have profited from our investment and that’s the way it should be.”

The global confectionery business, worth $183 billion last year according to Euromonitor International, has struggled as more consumers move toward healthier foods, prompting some retailers to reduce shelf space for processed and sugary snacks.

“We are grateful for the strong and productive partnership we have with Warren Buffett and Berkshire Hathaway,” Mars CEO Grant Reid said in a statement. “Sole ownership of Wrigley provides us with an opportunity to rethink how we simplify our chocolate and Wrigley businesses.”

Mars, the world’s largest candy maker ahead of rivals such as Mondelez International and Hershey Co., expects to combine its chocolate and Wrigley businesses during 2017 into Mars Wrigley Confectionery, with about 30,000 employees.

The combined business will be based in Chicago, Wrigley’s longtime home, and led by Martin Radvan, Wrigley’s president and a 30-year veteran of Mars. Mars is based in McLean, Virginia.

In Canada, Mars operates three manufacturing plants in southern Ontario in segments including packaged foods, pet foods and confectionery. Wrigley announced last year it would shut down its lone Canadian plant, a gum facility in Toronto, this spring.

Known for his taste in less-than-healthy food, Buffett has made Berkshire the largest shareholder of Coca-Cola, and helped Brazil’s 3G Capital take over Kraft Heinz and Restaurant Brands International Inc., which owns Burger King and Tim Hortons. Berkshire also owns See’s Candies.

But unwinding the Mars stake will deprive Berkshire of a $105 million annual income stream from the preferred stock.

The investment was one of several that Buffett’s Omaha-based conglomerate made during and soon after the financial crisis in brand name companies seeking to shore up their finances, and win the billionaire’s imprimatur.

From 2008 to 2011, Berkshire invested well over $20 billion in high-yielding securities from Bank of America, Dow Chemical, General Electric, Goldman Sachs Group, Swiss Re and Wrigley.

But many have been repurchased, forcing Buffett to find other ways to invest Berkshire’s $72.7 billion of cash.

He lost $720 million of annual income in June when Kraft Heinz, in which Berkshire still owns a 26.8 per cent stake, redeemed preferred stock. The Wrigley notes had thrown off an 11.45 per cent coupon.

— Reporting for Reuters by Jonathan Stempel and Chris Prentice in New York and Gayathree Ganesan in Bangalore.

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