Hexo announces acquisition of Newstrike Brands for about $197 million

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hexo – Hexo to acquire Newstrike Brands in an all-stock deal.

Quebec-based cannabis company Hexo Corp. HEXO, +3.94% HEXO, +3.92% said Wednesday it has agreed to acquire Toronto-based Newstrike Brands Ltd.NWKRF, +6.10% HIP, +6.67% in an all-stock deal valued at about C$263 million ($197 million). Newstrike shareholders will receive 0.06332 Hexo shares for each Newstrike share owned. Both boards have approved the deal which must now be approved by shareholders. The deal will give Hexo an extra capacity of roughly 150,000 kg of cannabis annually and diversify its domestic market distribution. The combined companies will have agreement in 8 Canadian provinces, including Quebec, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, and Prince Edward Island. The companies expect to generate annual synergies of $10 million. Hexo is expecting to achieve net revenues from Canadian cannabis sales of $400 million for fiscal 2020. Hexo shares rose 2.7% premarket on the news. U.S.-listed shares of Newstrike were not yet active.

HEXO Corp. shares were trading at $5.77 per share on Wednesday morning, up $0.19 (+3.41%). Year-to-date, HEXO has gained 68.22%, versus a 12.64% rise in the benchmark S&P 500 index during the same period.

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