In the latest sign of industry consolidation, Canadian cannabis producer Tilray Brands (TLRY) is buying rival Hexo Corp. (HEXO) in a deal worth $229 million U.S.
The acquisition of Hexo will further strengthen Tilray’s position as Canada’s leading cannabis company.
The deal will see Tilray pay $56 million U.S. in stock to acquire the remaining outstanding shares of Hexo that it doesn’t already own.
Tilray will also exercise a $173 million U.S. secured convertible note it acquired from Hexo’s former creditor HT Investments MA LLC in July 2022.
In the end, Hexo shareholders will receive the equivalent of $1.25 U.S. per share from Tilray in the acquisition.
Tilray has used mergers and acquisitions to become Canada’s biggest cannabis company. In December 2020, Tilray merged with Aphria. Once the Hexo purchase is completed, Tilray will control about 13% of Canada’s cannabis industry, up from 8% currently.
Hexo shareholders are expected to vote on the deal during a special meeting scheduled for June 22 of this year. Hexo’s board of directors supports the acquisition by Tilray.
Hexo has struggled with mounting losses and internal restructuring for several years as it grappled with declining revenues and the dominance of Canada’s black market for recreational cannabis.
Tilray announced the takeover of Hexo as it reported a fiscal third quarter loss of $1.2 billion U.S., due mostly to a $1.1 billion U.S. impairment charge.
Tilray’s stock has declined 54% in the last 12 months to trade at $3.73 per share. Hexo’s share price has fallen 79% over the past year to $1.64 U.S. a share.
