Hexo Corp (TSX: HEXO) (NYSE: HEXO) is evidently focused on acquiring struggling Canadian cannabis cultivators. The company this morning announced that it has entered into an arrangement to acquire 48North Cannabis (TSXV: NRTH) in an all stock transaction, prior to the closing of the Zenabis Global (TSX: ZENA) acquisition.
The company has justified the additional purchase on the basis that when combined with the Zenabis acquisition, the transactions are expected to make the firm “among the leading licensed producers in terms of combined Canadian recreational sales.” Among other items that struggle to excite, are accretive synergies of up to $12 million within a year of closing, and the ability of 48North shareholders to “participate in Hexo’s future.”
The transaction will see 48North valued at a total figure of $50 million on an enterprise value basis. 48North shareholders are to receive 0.02366 of a Hexo share for every share of 48North held, which amounts to roughly $0.175 per share based on Friday’s closing prices. The price reportedly reflects a 20% premium to the current 10 day volume weighted average price of the equity. 48North shareholders are expected to own 4% of the resulting company upon closing of the transaction.
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Furthermore, the transaction is subject to the approval of 48North shareholders, with 25.9% of the vote already secured via voting support arrangements. A $2.0 million termination fee applies to the transaction, with Hexo also providing the company with a $5.0 million subordinated secured bridge loan within 30 days following the signing of the agreement for working capital purposes.
A hard date for the closing of the transaction was not provided.
Hexo Corp last traded at $7.39 on the TSX.
Information for this briefing was found via Sedar and Hexo Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
