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HEXO to acquire and Newstrike Brands for $263M

16 March 2019

Hexo Corp a bold prediction after the announcement about Newstrike Brands.

HEXO's revenues come largely from the Quebec recreational cannabis market - for its latest quarter ending October 31, 2018, the company brought in a net revenue of $3.7 million, and shipped 952 kilograms of dried flower equivalents to the adult-use market, most of which went to fulfill its supply agreement with Quebec's provincial distributor. Newstrike shareholders will receive 0.06332 Hexo shares for each Newstrike share owned.

"They're fully supportive of the deal, and without their support we would not have done the deal", St-Louis said in a phone interview.

"I don't think we are going to see too many more deals that are about adding capacity and distribution, maybe a handful more", he said.

The move has been approved unanimously by both companies' board of directors, though it still requires approval from 66% of Newstrike's shareholders to move forward.

Newstrike, which has the stock symbol HIP, was set to be acquired by CanniMed Therapeutics Inc.in an all-stock deal in 2017.

HEXO Corp is an award-winning consumer packaged goods cannabis company that creates and distributes prize-winning products to serve the global cannabis market.

Newstrike's position in Ontario and "English Canada" complements Hexo's position in Quebec, commented Newstrike CEO Jay Wilgar.

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

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While the acquisition would give Hexo a stronger foothold in Canada, Lake says that the firm is also looking at cannabis market openings in Latin America, the United States and Europe.

PM Rendon, spokesperson for Newstrike, told INN the partnership with Inner Spirit "will continue as before" after the Hexo acquisition is completed. "We will leverage the winning strategies and platforms of both companies to maximize the potential of the combined company".

Newstrike had previously signed agreements with Manitoba, Prince Edward Island, Nova Scotia, Ontario and Alberta.

Total sales of cannabis oil in January was 7,856 litres increased by 4.3 per cent, although the bulk of that product was sold into the medical market.

"We're thrilled to welcome the Newstrike team into the HEXO family".

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.

The new deal will add "470,000-sq-ft in production space" to HEXO's already existing production capabilities, according to a press release.

Asked whether Wilgar and the rest of the management team at Newstrike would transition into Hexo as well, Rendon said "a transition team will be working between now and the close of the transaction on integration matters", but no integration is being disclosed until the deal closes. This article is not paid-for content.

HEXO to acquire and Newstrike Brands for $263M