Gatineau cannabis producer Hexo will be acquired by Tilray Brands.
The multinational with its main offices in Ontario and New York estimates the purchase price at approximately 75 million CAN (56 million US).
If the agreement is approved, Hexo shareholders will receive 0.435 shares of Tilray for each share they hold.
Founded in 2013 by Sébastien St-Louis and Adam Miron, Hexo is one of the main suppliers of the Société québécoise du cannabis (SQDC). The company was worth more than $2 billion on the stock market four years ago.
Hexo became the darling of investors shortly after the country legalized recreational cannabis in 2018.
The company, however, lost favor with investors after the release of disappointing results, several management changes, pricing pressure, slower-than-expected product rollouts, and a delay in the approval of derivatives by the government.
Hexo increased its production and processing capacity two years ago by making several acquisitions.
Strategic partnership
Over the past year, management had developed and implemented a turnaround and cost reduction plan.
The sale of Hexo to Tilray comes after the two companies announced a strategic partnership last year that will include collaboration in distribution and packaging to improve operational efficiency and generate savings.
The agreement also gave Tilray the option of acquiring a stake in Hexo.
Tilray argues that the combination of the two companies should strengthen its current position in Canada with a market share of 12.9%.
“When we began working with Tilray last year, the value that could be achieved by combining our businesses to compete and drive profitable growth in the highly fragmented Canadian market quickly became apparent,” commented by communicated the chairman of the board of directors of Hexo, Mark Attanasio.
“Given the recent headwinds that have blown through the cannabis industry, the Board of Directors believes that shareholders would benefit from joining the ranks of Tilray and benefiting from this diversified company’s plan to strengthen its leadership in the industry and its results while stimulating the creation of value”, he specifies.
Hexo’s stock jumped around 30% in the last hour of trading on Monday before the deal was announced at the close of trading. The stock price of $2.23 recorded at market close gave Hexo a market value of approximately $100 million.
