Hexo Corp. says it will close its Belleville facility this summer, affecting 230 employees as it further streamlines operations.
The Gatineau-based cannabis company had continued to lease the Ontario facility after selling its 25 per cent interest in Belleville Complex Inc. in January for about $10.1 million.
Hexo says the Truss Beverage Co. operations – a joint venture with Molson Coors Canada – are not affected by this change and will continue to operate out of the Belleville facility.
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Acting chief operating officer Charlie Bowman says the closure is designed to significantly reduce costs by streamlining operations and capitalizing on production efficiencies.
All manufacturing machinery and equipment located in Belleville will be transferred to other sites by the end of July.
Hexo’s previously announced strategic plan is designed to become cash-flow positive from operations.
“This was a very difficult decision, but it is a key component of executing on our strategic plan, and one that we believe best positions Hexo for profitable growth,” said president and CEO Scott Cooper in a news release.
The decision comes just weeks after Hexo signed a deal that could see rival Tilray Brands acquire a significant stake in the Gatineau cannabis company.
Tilray will acquire the US$193 million in outstanding senior secured convertible notes that were issued by Hexo and held by funds affiliated with HT Investments MA LLC.
The notes will be amended to include conversion rights at a price of 85 cents Canadian per Hexo share, a price that implies Tilray Brands would have the right to convert the notes into a 35 per cent stake in Hexo.
The deal will also see Tilray and Hexo form a joint venture to provide shared services to both companies. They estimate total savings, which will be shared equally, are expected to be up to C$50 million within two years.
Hexo reported a net loss of $690.3 million in its most recent quarter as it recorded $616 million in one-time impairment charges as it worked to turn around the cannabis business.