A week does not go by without another sign that the newly legalized marijuana market is gaining legitimacy – and attracting more and more investor interest.
Take yesterday’s announcement by Quebec-based marijuana producer Hexo Corp (TO:HEXO) as just one of the latest examples. Hexo announced it is buying cannabis grower Newstrike Brands Ltd (V:HIP) of Oakville, Ont. The $263-million deal is an all-stock takeover. The board of directors of both companies have approved the arrangement, which now only awaits finally approval by Newstrike shareholders. Once ratified, this deal will mean Newstrike shareholders will own a 14-percent position in the new joint company.
Newstrike shareholders will receive 0.06332 of a Hexo common share in exchange for each Newstrike common share held, according to a press release put out by both companies.
The deal is the largest to date between two Canadian marijuana producers, and would extend Hexo’s distribution network into eight provinces. It is currently only in three. It would also peg Hexo among the top cannabis companies in Canada, running behind Canopy Growth, Aurora Cannabis, Aphria and Tilray.
In reaction to the news, shares of Hexo increased more than 6 percent, closing up 5.81 percent on the day at $7.83 per share. Hexo has a market capitalization of $1.65 billion. Newstrike shares jumped 11.11 percent, closing at $5 even. The company has a market cap of $278.62 million.
Last week it was announced that Hexo was one of eight publicly-traded companies that will be added to the TSX Composite, Canada’s broadest index of the largest stocks, graduating from the TSX Venture exchange. Hexo will begin trading on the composite on March 18.
In the statement announcing the deal with Newstrike yesterday, Hexo said it is aiming to surpass the $400-million mark in net revenues in 2020, and is looking to ink a few more deals, particularly expanding into the U.S.
“Canada is just the first launching point and, in typical Hexo fashion, we take it one step at a time,” said Hexo CEO Sebastien St. Louis in an interview with BNN.
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