HEXO Buys Zenabis In $235M Stock Deal To 'Expand Global Presence'

HEXO Corp. HEXO HEXO confirmed Tuesday it will buy Zenabis Global Inc. ZENA for $235 million in an all-stock transaction.

Both companies agreed to the acquisition by way of a court-authorized plan of arrangement under the Business Corporation Act.

Zenabis shareholders will obtain 0.01772 of a Hexo share for one Zenabis share. Zenabis’ board of directors has unanimously recommended the shareholders to vote for the transaction.

After the transaction is finalized, current shareholders of both HEXO and Zenabis would respectively hold around 87.43% and 12.57% of HEXO on a pro forma fully-diluted basis.

In addition, Hexo has agreed to expand its board of directors by one seat and appoint a current director from Zenabis.

Echelon Capital Markets advised Zenabis on the sale process. Law firm Stikeman Elliott LLP provided legal counsel.

A.G.P./Alliance Global Partners and Norton Rose Fulbright Canada LLP advised Hexo on financial and legal matters, respectively. 

Why It Matters

With this transaction, Hexo will:

• Be a top three licensed producer in Canada, based on recreational cannabis sales;
• Reach the European medical cannabis market via Zenabis’ local affiliate;
• Have annual synergies of around $20 million within one year,
• Get closer to reaching positive earnings;
• Have the capacity to manufacture around 111,200 kilograms of extra cannabis annually.

“We're thrilled to welcome the Zenabis team into the HEXO family. Zenabis has built solid relationships and they share HEXO’s vision of bringing exceptional branded cannabis experiences to adults everywhere, in Canada and abroad,” Hexo CEO Sebastien St-Louis said. “We are proceeding with this transaction because we believe it should be accretive for our shareholders, and it also positions HEXO for accelerated domestic and international growth while supporting near-term requirements for additional licensed capacity."

Hexo’s growth strategy includes expanding its global presence, and this acquisition is considered "an important step in that direction,” St-Louis added.