HEXO Corp has entered into a definitive arrangement agreement under which it will acquire all of Newstrike Brands Ltd’s issued and outstanding common shares in an all-share transaction valued at approximately $263 million.
Newstrike is the parent company of Up Cannabis Inc., a licensed producer of cannabis that is licensed to both cultivate and sell cannabis. Newstrike works with select strategic partners including Canada’s iconic musicians The Tragically Hip.
As one of the largest licensed cannabis companies in Canada, HEXO Corp operates with 1.8 million sq. ft of facilities in Ontario and Quebec and a foothold in Greece.
Under the terms of the buyout, Newstrike shareholders will receive 0.06332 of a HEXO common share in exchange for each Newstrike common share held.
The transaction gives HEXO the capacity to produce approximately 150,000 kg of high-quality cannabis annually.
It also provides HEXO access to four cutting-edge production campuses totalling close to 1.8 million sq. ft. of near-term cultivation space and diversified growing and production techniques.
This is in addition to HEXO’s 579,000 sq. ft. facility for a manufacturing and product development centre of excellence in Belleville, Ontario.
“With Newstrike, we’re adding talented employees and infrastructure to take HEXO to the next level on our journey to become one of the largest cannabis companies in the world.”
Sebastien St-Louis, HEXO Corp (pictured)
“We’re thrilled to welcome the Newstrike team into the HEXO family. Jay Wilgar (CEO of Newstrike) and his team have built incredible relationships, including teaming up with The Tragically Hip, and they share HEXO’s vision of bringing exceptional branded cannabis experiences to adults everywhere,” said Sebastien St-Louis, CEO and co-founder of HEXO Corp.
“With Newstrike, we’re adding talented employees and infrastructure to take HEXO to the next level on our journey to become one of the largest cannabis companies in the world. We’re extremely proud of our record of execution, and today are committing to achieving over $400 million in net revenue in 2020.”
Jay Wilgar, CEO of Newstrike, said: “This is the most compelling combination we see in the Canadian cannabis sector. Our strength in Ontario and English Canada clearly complements HEXO’s strong position in Quebec and creates an industry leader.
“The combination will deliver meaningful synergies, a stronger financial position with increased flexibility, and will position the combined company to meet growing consumer demand on a national basis. I believe this transaction is beneficial to our shareholders, customers, and employees. We look forward to working closely with the leadership team to complete this transaction.”
In addition to Newstrike shareholder approvals, the Transaction is subject to the receipt of certain regulatory court and stock exchange approvals and the satisfaction of other conditions customary in transactions of this nature.
Upon completion of the Transaction, existing HEXO and Newstrike shareholders would own approximately 86% and 14% of the pro forma company, respectively, on a fully diluted basis.Cannabis Business Worldwide