A multimillion-dollar acquisition that is poised to make Gatineau-based Hexo one of the world’s largest cannabis producers is now official.
Hexo announced on Friday that its $263-million all-stock deal to acquire Toronto-based Newstrike Brands, the parent company of pot producer Up Cannabis, has received final court and regulatory approvals.
“The combination of these two talented teams, both pioneers in the cannabis industry, will accelerate Hexo’s vision of creating the best cannabis technology company,” Hexo CEO Sebastien St-Louis said in a statement, adding the company is now beginning “the next phase of its great adventure.”
Under the agreement, Newstrike shareholders will receive 0.06332 of a share in Hexo (TSX: HEXO) for each Newstrike share they own. Newstrike is expected to be delisted from the TSX Venture Exchange by the close of trading on Tuesday.
The deal is projected to add roughly 470,000 square feet of growing space in Ontario to Hexo’s existing footprint. The company already has 1.3 million square feet of greenhouse facilities in Gatineau, and the acquisition will give it the capacity to produce some 150,000 kilograms of cannabis annually, up from its current level of just under 110,000 kilograms.
Hexo’s net revenue guidance is expected to rise to more than $400 million in fiscal 2020, and the two firms’ combined distribution agreements now cover eight provinces.
Terry Lake, Hexo’s vice-president of corporate social responsibility, told OBJ in March the acquisition would turn Hexo into a “top-tier cannabis company” overnight.
“That, I think, is a significant signal to the market that this is a serious company that can compete at the top level,” he said.
While the addition of new production capacity gives Hexo a stronger foothold in Canada, Lake said the firm was also looking at expanding into the Latin American, U.S. and European markets. Hexo announced plans last fall to set up a production site in Greece.
Hexo shares were up 29 cents to $9.33 in late-afternoon trading Monday on the Toronto Stock Exchange.