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HEXO Pays about $260 Million to Acquire Newstrike Brands

16 March 2019

The two companies also have established distribution agreements in eight provinces, excluding New Brunswick and Newfoundland and Labrador.

"We're extremely proud of our record of execution, and today are committing to achieving over $400 million in net revenue in 2020", St-Louis said in a statement. Newstrike shareholders will receive 0.06332 Hexo shares for each Newstrike share owned.

The Hexo-Newstrike deal is the latest sign of consolidation in Canada's cannabis sector, and not the only time firms have signaled an interest in the Ontario-based grower. In November 2017, CanniMed had announced an all-stock deal to acquire Newstrike. While Hexo does not indicate how many grams are now in inventory, it notes that it expects to yield 12,871KG of product based on current growth, which compares to 4,938KG harvested during Q2. "Jay Wilgar (CEO of Newstrike) and his team have built incredible relationships, including teaming up with The Tragically Hip", said Sebastien St-Louis, CEO and co-founder of HEXO, in a press release.

Multiple public cannabis companies, and even some LPs, have established relationships with winners of the Ontario cannabis retail lottery to aid in the roll-out of the retail market.

Earlier this month, Statistics Canada said annualized Canadian household spending on cannabis totalled $5.9 billion in the fourth quarter, with the black market accounting for $4.7 billion of that figure and the legal market estimated at $1.2 billion.

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With agreements in place with seven provincial distributors, Up Cannabis operates within an elite group of Licensed Producers.

PM Rendon, spokesperson for Newstrike, told INN the partnership with Inner Spirit "will continue as before" after the Hexo acquisition is completed.

At the same time, inventories of finished cannabis oil held by federal license holders, wholesalers and retailers sky-rocketed from 2,600 liters in October to over 19,000 liters in January. "The combination will deliver meaningful synergies, a stronger financial position with increased flexibility, and will position the combined company to meet growing consumer demand on a national basis".

Shares of both producers rallied on Tuesday based on the announcement.

Newstrike on the other hand closed with at a price of C$0.50 representing a 11.11 percent increase for the day.

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HEXO Corp., a company that serves medical and adult-use cannabis markets in Canada, agrees to buy Newstrike Brands, a Canadian producer and cultivator of medical cannabis. To cut down amount of noise on price chart, shares of firm has 20 days moving average price of 6.16% from last close price of 5.95 and act as support or resistance of price limit.

Don't forget to follow us @INN_Cannabis for real-time news updates!

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above. This article is not paid-for content.

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HEXO Pays about $260 Million to Acquire Newstrike Brands