Hexo strikes deal to accumulate Zenabis for CA$235M, eyes European hashish market


Ottawa, Ontario-headquartered hashish producer Hexo Corp. on Tuesday entered a definitive association settlement to purchase struggling competitor Zenabis World for 235 million Canadian ($185 million) in inventory.

The proposed acquisition of Vancouver, British Columbia-based Zenabis would give Hexo a toehold in Europe’s medical marijuana market.

Zenabis shareholders will obtain zero.01772 of a Hexo share per Zenabis share beneath the phrases of the proposed association, which represents a 19% premium over the 20-day common as of Feb. 12, the businesses mentioned in a information launch asserting the deliberate acquisition.

Each companies have offered off infrastructure and reported appreciable losses in recent times.

Hexo misplaced CA$four.2 million in its earlier quarter and CA$546.5 million within the fiscal yr earlier than that.

Zenabis misplaced CA$40.5 million within the 9 months ended Sept. 30, 2020, and an extra CA$127 million within the 2019 fiscal yr.

“We’re continuing with this transaction as a result of we imagine it ought to be accretive for our shareholders, and it additionally positions Hexo for accelerated home and worldwide development whereas supporting near-term necessities for added licensed capability,” Hexo CEO and co-founder Sebastien St. Louis mentioned in a press release.

“Hexo’s development technique consists of increasing our international presence, and this acquisition is a crucial step in that route.”

The deal has been authorised by the respective firms’ boards however nonetheless requires approval by Zenabis shareholders.

Based on Hexo, the mixed firm can be a top-three licensed producer when it comes to leisure gross sales.

The deal additionally would give Hexo a foothold within the European medical marijuana market.

“The transaction provides Hexo rapid entry to the European medical hashish market by Zenabis’ native associate, with a longtime facility within the European Union supplying pharmaceutical merchandise to the European market,” the corporate mentioned.

Based on an investor replace by Zenabis final summer season, the corporate additionally has a deal to produce the rising Israeli and Australian markets.

Nonetheless, Hexo’s transfer comes as some rival Canadian firms are scaling again within the European market.

Aurora Hashish and Cover Development, as an example, each reeled in growth plans in Europe in 2020.

Marijuana Enterprise Each day‘s European report, revealed final yr, estimated Germany’s annual retail gross sales in 2019 of at the least 170 million euros ($200 million). That compares with Canadian expenditures that yr of about CA$618 million.

Hexo additionally mentioned the proposed deal would give it “entry to a 2.1 million sq. ft greenhouse facility, totaling roughly 2.735 million sq. ft of near-term cultivation area providing diversified rising and manufacturing strategies.”

Zenabis additionally brings with it two indoor manufacturing services and provides roughly 111,200 kilograms (245,154 kilos) of annual cultivation capability to Hexo, in line with the discharge.

Lower than one yr in the past, Hexo offered a big greenhouse in Niagara, Ontario, for roughly CA$10.25 million that it beforehand acquired as a part of a CA$263 million deal to purchase Newstrike Manufacturers.

Canada can also be sitting on a worsening stock overhang, which reached a staggering 1.06 million kilograms after the nation’s first large-scale “croptober” – when many of the fall out of doors harvest is available in.

Late final yr, Zenabis reached a conditional settlement to promote one in every of its services in British Columbia for half the unique itemizing worth.

Zenabis had CA$four.eight million in money as of Sept. 30, 2020.

Hexo had CA$149.eight million in money on the conclusion of its earlier quarter ended Oct. 31, 2020.

The corporate’s shares commerce as HEXO on the New York Inventory Change and Toronto Inventory Change.

Matt Lamers is Marijuana Enterprise Each day’s worldwide editor, primarily based close to Toronto. He could be reached at [email protected].

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