HEXO Corp (HEXO) has announced that it has entered a definitive agreement with Newstrike Brands limited (OTCMKTS:NWKRF). Under the definitive agreement, HEXO will acquire all the outstanding and issued common stock of Newstrike as per the Business Corporations Act of Ontario.
The acquisition will be an all-share transaction estimated to be around $263 million. In return, the Newstrike shareholders will get 0.06332 of HEXO’s common share in return for each common stock held at Newstrike. Both the companies’ board of directors have unanimously approved the agreement, and Newstrike’s board has recommended it to its shareholders to pass the agreement.
Acquisition to expand local and international market penetration
The acquisition will boost the cannabis production capacity of HEXO to over 150,000 kg annually because of the ultramodern cultivation infrastructure that Newstrike brings on board. Equally, HEXO will get access to the Newstrike’s four production campuses of almost 1.8 million square feet as well as diversified cultivation and production techniques. The four facilities will be an addition to the 579,000 square feet manufacturing and production facility the HEXO holds in Belleville, Ontario.
In a move to diversify their market penetration the companies also established a distribution agreement in eight provinces across Canada to enhance consumer access to the HEXO products. The areas covered include Manitoba, Ontario, Quebec, Alberta, British Colombia, Prince Edward Island, Nova Scotia as well as Saskatchewan.
Combined entity to bring in $10 million annually
The licensed indoor facility of Newstrike will also offer HEXO access to the different growing techniques which will help position the company for global exports as the cannabis market continues to grow. With the acquisition, the combined entity is likely to bring $10 million in annual synergies which will enable HEXO efficiently operate.
HEXO Corp CEO, Sebastien St-Louis said that the company was glad to be part of Newstrike which is an incredible company that shares their vision of producing premium cannabis branded products. He equally indicated that the transaction means that they will add talented employees to their business as well as infrastructure that will take the company to the next level of becoming a leading cannabis company in the world.