Published: Sat, March 16, 2019
Economy | By

HEXO Seals $263 Million Bargain Deal for Newstrike

HEXO Seals $263 Million Bargain Deal for Newstrike

Additionally, the acquisition is expected to increase HEXO's footprint from three to eight provinces (Ontario, Quebec, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, and Prince Edward Island), which allows broader access to HEXO's products.

HEXO hopes this will buoy them to their goal of $400 million in yearly net revenue by July 2020.

Sources close to the deal claim that Newstrike shareholders, as part of the agreement, will receive a 0.06332 share of HEXO in exchange for each Newstrike held share.

"They're fully supportive of the deal, and without their support we would not have done the deal", St-Louis said in a phone interview.

"I think that's something that is significant for the capital region and something we're very proud of". The company expects $10 million in annual savings on the production and administrative side as a result of the merger, which remains subject to approvals from courts and regulators as well as Newstrike shareholders. Through its hub and spoke business strategy, HEXO Corp is partnering with Fortune 500 companies, bringing its brand value, cannabinoid isolation technology, licensed infrastructure and regulatory expertise to established companies, leveraging their distribution networks and capacity.

Newstrike, which has the stock symbol HIP, was set to be acquired by CanniMed Therapeutics an all-stock deal in 2017.

Multiple public cannabis companies, and even some LPs, have established relationships with winners of the Ontario cannabis retail lottery to aid in the roll-out of the retail market.

Industry experts say, however, that the shortage seen in the regulated market is not necessarily reflective of the totality of cannabis available for sale, but in the particular products consumers want to buy.

In December, cannabis company Aleafia announced a deal to acquire licensed producer Emblem Corp.

Shares of both producers rallied on Tuesday based on the announcement.

Total sales of cannabis oil in January was 7,856 litres increased by 4.3 per cent, although the bulk of that product was sold into the medical market. "We are thrilled to have been selected by Up Cannabis to provide guarding services and secure transport for a company with clear growth ambitions, tremendous production capacity, and supply agreements in place that can support its strategic intentions".

HEXO Corp., a company that serves medical and adult-use cannabis markets in Canada, agrees to buy Newstrike Brands, a Canadian producer and cultivator of medical cannabis.

The Canadian rock band owns more than 5 percent of Newstrike and has been a key adviser to the Toronto-based pot firm, according to Hexo Chief Executive Officer Sebastien St-Louis. "We look forward to working closely with the leadership team to complete this transaction".

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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