The Canadian pot company Canopy Growth last week announced it entered an agreement to purchase Acreage Holdings, a US pot company, for $3.4 billion, conditional on the federal legalization of marijuana in the US.

The deal's unique structure could present an opportunity for more cross-border cannabis mergers, as well provide a framework for big consumer-packaged-goods, pharmaceutical, and tobacco companies to get in on the lucrative US cannabis market without violating federal laws.

The Canadian marijuana behemoth Canopy Growth last week announced it had entered into a conditional agreement to purchase Acreage Holdings, a US pot company, for $3.4 billion, pending federal legalization in the US.

Canopy Growth, in other words, is leveraging its Constellation Brands-backed balance sheet to make a huge bet on the US federally legalizing marijuana.

The structure of Canopy's deal could provide a framework for more of these cross-border mergers, and perhaps pave the way for the biggest consumer, tobacco, and pharmaceutical companies to enter the lucrative US cannabis market and spur a cannabis mergers-and-acquisitions boom, according to numerous cannabis CEOs, investors, and lawyers.

Read more: 'My lips are wet, my mouth is watering to get a piece of that': A war is brewing between US and Canadian marijuana companies to claim a $75 billion market

The deal "shakes the foundation of what has been true," Keith Merker, the CEO of the Canadian marijuana cultivator WeedMD, told Business Insider in an interview on the sidelines of the Benzinga Cannabis Capital Conference in downtown Toronto's Fairmont Royal York hotel.

"This deal will absolutely be scrutinized by all industry participants, from the exchanges to the regulators to investors," Merker said. "We'll be all over this like a wet blanket."

'It's sort of like waiting for the Mueller report'

Here's how the deal works: Acreage shareholders will receive an immediate $300 million payment in cash, according to sources close to the deal, pending approval by the Supreme Court of British Columbia, as well as both Canopy and Acreage shareholders. The value of the deal represents a 41% premium on Acreage's weighted share price.

The rest of the money would come as soon as there is a "federally permissible" pathway to legalization in the US. That pathway could take the form of the recently reintroduced States Act, a bill that would allow states to choose their own route on marijuana legalization (as many have already done), according to Vivien Azer, a cannabis analyst at the investment bank Cowen. The bill would also protect banks that want to invest in the industry in states where marijuana is legal.

Flowering marijuana plants at the Canopy Growth facility in Smiths Falls, Ontario. Thomson Reuters

"There's never been another industry where you've had a federally illegal activity that's legal at the state level and that is also fully legal in a neighboring country," said David Feldman, a partner at the law firm Duane Morris who leads the firm's cannabis practice group and was not involved in the deal.

"This is a very unique set of circumstances," Feldman said. "Even liquor prohibition was nationwide — there were no exceptions."

The deal will be terminated in seven years if a federally legal pathway doesn't emerge. It's not clear what would happen to the $300 million that Canopy Growth paid up front if the deal doesn't go through.

"We don't yet know what's in the agreement," Feldman said. "It's sort of like waiting for the Mueller report."

Both the Toronto Stock Exchange and the New York Stock Exchange, where Canopy is dual-listed, do not allow listed companies to invest in or own US cannabis because the drug is federally illegal.

While it's not clear whether the TSX or the NYSE will change its policy — representatives from both exchanges declined to comment to Business Insider — Jonathan Sherman, a lawyer from the firm Cassels Brock that represented Canopy on the transaction, told Business Insider that the deal was in the works for over eight months and that each exchange's regulators had been "looped in" to the discussions.

Read more: Canadian marijuana companies are quietly pushing the Toronto Stock Exchange to allow them to invest in the lucrative US market, and it could be transformative for the $75 billion industry

"I don't think this announcement would shock anyone," Sherman said of the exchange regulators.

Sherman said the structure of this deal had the potential to "untap the market" for companies that want to pursue US cannabis acquisitions while remaining onside of both federal and stock-exchange regulations.

"You're going to see some interest from alcohol, tobacco, and pharmaceutical companies that aren't in the space right now because of sensitivity to cannabis generally," Sherman said.

Business Insider previously reported that Canadian cannabis companies had been lobbying the TSX to change exchange regulations to allow them to purchase US assets.

The deal is not without some precedent, however. Canopy Growth has already purchased warrants in Slang Worldwide, a cannabis brand headquartered in Toronto but with operations in several US states.

Canopy's deal with Acreage takes a similar deal structure "to the next level," Slang CEO Peter Miller said in an interview.

Ryan Douglas smelling a marijuana plant at Tweed Marijuana in Smiths Falls. Blair Gable/Reuters

"The warrant will allow them to buy the entire company," Miller said.

Slang's and Acreage's deals with Canopy are caveated in that they're exercisable only upon a change in federal law. "That immediately says, right in black and white, 'We're not going to do anything that goes offsides what the exchanges will allow,'" Miller said.

"Canopy has just gone bigger than everybody, as they do — they don't take small swings," Miller said.

Nicholas Vita, the CEO of Columbia Care, a New York medical-marijuana company, told Business Insider that this deal was "very typical of Canopy Growth's behavior to be a first mover."

"You have large Canadian companies that were essentially boxed out of the US market," Vita said, adding that the deal opens up a "large range of opportunities for consolidation and partnerships."

Canopy's moving 'far out ahead' of the traditional risk curve

Part of what the deal gives Acreage, Vita said, is access to deeper capital markets. Because of the ever-changing regulations in the cannabis industry, there's a quirky setup where US operators like Acreage are forced to list on the Canadian Securities Exchange, a secondary exchange, whereas Canadian operators can tap into premier exchanges like the TSX and the NYSE.

And that access to capital via Canopy's position on both exchanges can help a company like Acreage grow more rapidly by reducing the cost of capital as US marijuana companies fight for market share.

"Ordinarily, you don't see a corporation move so far out ahead of the risk curve in advance of a decision," Vita said of Canopy's $3.4 billion bet that the US will federally legalize marijuana.

Read more: Unilever is the latest consumer giant to break into the potentially $16 billion hemp and CBD space with a new line of deodorants

"I'd imagine you're going to see several groups initiate transactions," Vita said. "Maybe not exactly like this, but I'd be surprised if all the large US operators and all the large global operators aren't having some conversations. It's going to be very rapid."

But for Acreage's shareholders, like John Boehner, the former Republican House speaker, this could just be a good opportunity to cash out, said Matt Hawkins, a managing partner of Cresco Capital Partners, a private-equity firm based in Dallas that invests in the cannabis industry.

"There's no doubt that this is a shot across the bow to US cannabis companies that Canopy has the war chest to be your exit" when marijuana becomes legal, Hawkins said on the sidelines of the Benzinga conference. Hawkins' firm invested in Acreage Holdings before it went public and still holds shares in the company.

"Canopy is the only company that could do this deal," Hawkins said. "That's why it's so tricky on the public side, because when you've got effectively one company that can come in and gobble up the No. 1 US marijuana company and dictate those terms the way they have, it doesn't make for much of a competitive landscape."