Early on March 13, HEXO (HEXO) rose after it announced that it will acquire Newstrike Brands. The deal will add ~470,000 square feet to the company’s capacity. HEXO said that the acquisition will add ~400 million Canadian dollars to the company’s annual revenues by 2020.
About the deal
The deal will cost HEXO ~263 million Canadian dollars in an all-share transaction. Newstrike shareholders will get 0.06332 per share of HEXO per Newstrike share. Every 100 shares of Newstrike will equal 6.332 shares of HEXO.
If we do the math, 6.332 shares of HEXO, which closed at 7.4 Canadian dollars before the news was announced, equals ~46.9 Canadian dollars. Newstrike Brands (HIP), which closed at 0.45 Canadian dollars, would be valued at 45 Canadian dollars. The premium comes to ~4% based on the closing price on March 12.
Jay Wilgar, Newstrike’s CEO, said, “Our strength in Ontario and English Canada clearly complements HEXO’s strong position in Quebec and creates an industry leader. 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.”
Earlier this morning, HEXO’s peers (HMMJ) including Aurora Cannabis (ACB), Innovative Industrial Properties (IIPR), and Tilray (TLRY) also rose. Read Aurora Cannabis Appoints a New Strategic Adviser and Tilray Adds a Former Goldman Sachs Executive to Its Team to learn more.