HEXO acquisition gives the cannabis company a boost

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HEXO is going to acquire medical cannabis-based holding company Newstrike Brands Ltd.

Canadian cannabis company HEXO announced a couple of days ago that it had entered into a definitive agreement to acquire Newstrike Brands, Ltd., a holding company that focuses on the medical marijuana industry. The deal will see HEXO provide Newstrike shareholders with a piece of the company and the deal has already been approved by the boards of both HEXO and Newstrike. When the acquisition is complete, existing HEXO and Newstrike shareholders will own about 86% and 14% of the new company, respectively.

HEXO will issue each Newstrike shareholder 0.06332 of a HEXO share for every Newstrike share owned. This implies a takeover premium of 4.1%, based on each company’s closing price on March 12, which were $7.40 (HEXO) and $0.45 (Newstrike).

Sebastien St. Louis, co-founder and CEO of HEXO, states, “With Newstrike, we’re adding talented employees and infrastructure to take HEXO to the next level on our journey to become one of the largest cannabis companies in the world. We’re extremely proud of our record of execution, and today are committing to achieving over $400 million in net revenue in 2020.”

Through the acquisition, HEXO will earn a supply deal with the Ontario Cannabis store for 10,000kg. This deal gives HEXO a supply agreement in Ontario, which goes with its current agreement with Société Québécoise du Cannabis.

HEXO, which is traded on the Toronto Stock Exchange under the ticker HEXO, has seen its price shoot up as a result of the news. Since March 13, it has risen from around $7.85 to $8.20 and has seen a 5.8% increase in two days.