The consolidation in the cannabis industry continues as Canadian company HEXO Corp HEXO and Newstrike Brands Ltd NWKRF reached an agreement under the terms of which HEXO will buy Newstrike for C$263 million ($196.7 million) in stock.
What Happened
Under the terms of the agreement, Newstrike shareholders will receive a 0.06332 shares of HEXO in exchange for each Newstrike share held. The transaction has been approved by the boards of directors of each company. Newstrike's board recommends shareholders voting in favor of the transaction.
Upon the completion of the acquisition, HEXO shareholders will own 86 percent of the new company, while Newstrike shareholders will hold the remaining 14 percent.
In addition, HEXO provided its financial guidance for fiscal 2020, taking into account the completion of the transaction. The company expects net and gross revenues from the sale of cannabis in Canada north of C$400 million and C$479 million, respectively.
The Cannabis Capital Conference is coming back to Toronto! Click here to learn how you can join Tim Seymour, Jon Najarian, Danny Moses, Alan Brochstein and many others.
Why It's Important
Newstrike is the parent company of Up Cannabis, a licensed producer and distributor of cannabis. The transaction will give HEXO access to four new cultivation campuses that will allow it to boost its production capacity to 150,000 kilograms. Moreover, Newstrike's licensed indoor facility will allow HEXO to take advantage of diversified growing techniques, potentially positioning it for international exports.
The combined company will have a wide distribution network with established agreements in eight provinces, Ontario, Quebec, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia and Prince Edward Island.
The deal is expected to create annual synergies of C$10 million.
Related Links:
Aurora Cannabis Appoints Nelson Peltz As Strategic Advisor
Nielsen, Headset, Deloitte Form Strategic Alliance To Provide Canadian Cannabis Data
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Click on the image for more info.
Cannabis rescheduling seems to be right around the corner
Want to understand what this means for the future of the industry?
Hear directly for top executives, investors and policymakers at the Benzinga Cannabis Capital Conference, coming to Chicago this Oct. 8-9.
Get your tickets now before prices surge by following this link.