Hexo Corp. will acquire competitor Zenabis Global Inc. in a $235-million deal that will give the cannabis company a European foothold and strengthen its domestic business.
“Hexo’s growth strategy includes expanding our global presence, and this acquisition is an important step in that direction,” Sebastien St-Louis, Hexo’s chief executive and co-founder, said in a statement Tuesday.
The deal, in which Hexo will acquire two indoor growing facilities and get access to a greenhouse, comes as the Canadian pot market is starting to consolidate amid talk of potential U.S. cannabis legalization.
Tilray Inc. and Aphria Inc. are set to merge later this year, after rumours suggested Aurora Cannabis Inc. was circling Aphria.
Under the agreement Tuesday, shareholders of Vancouver-based Zenabis will receive 0.01772 of a Hexo common share in exchange for each Zenabis common share held.
The companies said the ratio is a 19% premium based on the 20-day volume-weighted average price of Zenabis’ and Hexo’s common shares.
Hexo believes its deal will help the company go head-to-head with these rivals, access the European medical cannabis market through Zenabis’ partnerships and result in estimated annual savings of about $20 million within one year of the agreement being complete.
“Like Hexo, Zenabis believes that the combination should deliver meaningful synergies, a stronger financial position with increased flexibility, and should position the combined company to meet growing consumer demand on a national and international basis,” Shai Altman, Zenabis’ chief executive, said in a statement.
Pot companies have been eyeing international markets in recent months as they realize demand for recreational cannabis is lower than anticipated and that the illicit market has continued to flourish even after legalization.
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