One of the cannabis industries more closely watched mid-cap cannabis companies completed secured a bargain acquisition deal today. HEXO Corp (NYSE: HEXO) announced today that they were acquiring Newstrike Brands (CVE: HIP) in an all-stock transaction estimated at C$263 million.
The transaction would see HEXO add an extra 470,000 square feet in production space, additional private and public retail channels, and access to Newstrike’s signature brand, The Tragically Hip. The deal would also see HEXO expand its market presence from three to eight Canadian provinces. HEXO expects this deal to increase their annual revenues by $10 million, further hoping that they will end up with over $400 million in net revenue by the end of 2020.
“We’re thrilled to welcome the Newstrike team into the HEXO family. Jay Wilgar (CEO of Newstrike) and his team have built incredible relationships, including teaming up with The Tragically Hip, and they share HEXO’s vision of bringing exceptional branded cannabis experiences to adults everywhere,” said Sebastien St-Louis, HEXO’s CEO and co-founder. “With Newstrike, we’re adding talented employees and infrastructure to take HEXO to the next level on our journey to become one of the largest cannabis companies in the world. We’re extremely proud of our record of execution, and today are committing to achieving over $400 million in net revenue in 2020.”
HEXO is one of the more promising companies in the cannabis industry today, with many analysts expecting that the business is poised for explosive growth in the coming years. This current deal gives the company enough presence in the marketplace it could possibly become one of Canada’s top cannabis companies, behind current giants such as Aphria (TSE: APHA)(NYSE: APHA), Aurora Cannabis (TSE: ACB)(NYSE: ACB), and Canopy Growth (TSE: WEED)(NYSE: CGC). Under such a situation, it wouldn’t be surprising to see the company’s current market cap of $1.6 billion skyrocket to several times this figure in the years to come, especially if the companies $400 million net revenue estimates come true.
In response to the news, HEXO shares jumped up 5.8 percent as the markets reacted favorably to this development. As part of the deal, Newstrike shareholders will receive around 0.1 HEXO common shares for each Newstrike share that they currently own. Newstrike jumped up 11.1 percent today as well. Overall, today was a good day for cannabis stocks, with many jumping ahead due to a plethora of news announcements.
HEXO Corp Company Profile
HEXO Corp is an award-winning consumer packaged goods cannabis company that creates and distributes prize-winning products to serve the global cannabis market. Through its hub and spoke business strategy, HEXO Corp is partnering with Fortune 500 companies, bringing its brand value, cannabinoid isolation technology, licensed infrastructure and regulatory expertise to established companies, leveraging their distribution networks and capacity.
As one of the largest licensed cannabis companies in Canada, HEXO Corp operates with 1.8 million sq. ft of facilities in Ontario and Quebec and a foothold in Greece to establish a Eurozone processing, production and distribution centre. The Company serves the Canadian adult-use and medical markets. – HEXO
Newstrike Brands Company Profile
Newstrike is the parent company of Up Cannabis Inc., a licensed producer of cannabis that is licensed to both cultivate and sell cannabis in all acceptable forms. Newstrike, through Up Cannabis and together with select strategic partners, including Canada’s iconic musicians The Tragically Hip, is developing a diverse network of high-quality cannabis brands. – Globe NewsWire