Yesterday, Hexo Corp (TSX: HEXO) filed a management information circular related to the arrangement entered into with Tilray Brands (TSX: TLRY). While it relates to Tilray’s purchase of outstanding debt owed by Hexo, as it turns out, Tilray in fact tried to initially purchase the cannabis operator as a whole – at a premium.
This previously unknown detail was included in a timeline of events that lead to the note transaction in its current form. Hexo in early November had engaged BMO Capital Markets as a means of sourcing strategic alternatives for the company, following turmoil that had resulted in the firms CEO and COO being pushed out by the company. Recall at the same time that Stifel-GMP had suggested the firm may be headed to bankruptcy proceedings.
As part of that engagement, BMO had identified parties that “it believed may have been interested in a potential transaction” with Hexo. Unsurprisingly at this point, one of those parties appears to have been Tilray, whom submitted to BMO what is referred to as an “indication of interest.”
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Within that document, was the indication that Tilray would be interested in wholly acquiring Hexo Corp at a price of “$2.00 to $3.00 per share.”
Hexo’s management however rejected the offer, as it represented “less than sufficient value” for the company. This was despite the firm trading at a high of just $2.35 during that same month, and a low of $1.30, with that offer representing what may have been a substantial premium for shareholders at the time.
Tilray for its part however appears to remain focused on acquiring the Quebec-based grower. Allegedly, the firm directly stated that it intends to acquire roughly 50% of the company following the purchase of the outstanding debt note, with the remainder of the firm to be acquired at a later date.
Whether that will occur however remains to be seen.
Hexo Corp last traded at $0.41 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.
