(Reuters) - Canadian marijuana producer Canopy Growth Corp is close to a deal to buy U.S.-based pot firm Acreage Holdings, a source familiar with the matter told Reuters on Wednesday.

FILE PHOTO: A sign featuring Canopy Growth Corporation's logo is pictured at their facility in Smiths Falls, Ontario, Canada, January 4, 2018 . REUTERS/Chris Wattie/File Photo

The deal is expected to fetch a premium of about 28 percent to Acreage’s five-day average trading price - or roughly 25 percent of its closing price on Wednesday, the source said.

The transaction could be announced as soon as later on Wednesday, the source said, but cautioned there is no certainty that the two parties will agree to any deal.

The person asked not to be identified because the matter is still confidential.

Cannabis companies in Canada have been pouring cash into their businesses to fend off competition and develop new products, especially after the country approved the use of recreational marijuana in October. They have also been looking for ways to get into the U.S. market, where cannabis remains federally illegal.

Acreage went public on the Canadian Securities Exchange in November and has licenses or agreements with holders in 19 U.S. states, while also managing a chain of retail stores.

A deal would give Canopy the rights to Acreage’s products immediately and set up the two companies with an agreement to exchange stock later on the condition that marijuana becomes federally legal in the United States, the source added.

Based on the purchase agreement, Canopy could lend Acreage parts of their branding and intellectual property in order to penetrate the U.S. market while in turn helping Acreage grow, the source said.

Neither Acreage Holdings nor Canopy Growth immediately responded to requests for comment.

U.S.-listed shares of Canopy were up nearly 8 percent at $46.22 in extended trading.