HEXO Corp. based in Ottawa, 48North is acquiring $ 50 million worth of cannabis

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All-share transactions pave the way for HEXO to become one of the largest leisure providers in Canada.

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Angela Stelmakowich FILE: A worker walks past rows of cannabis plants growing in a greenhouse at the Hexo Corp. facility in Gatineau, Que., On Oct. 11, 2018.  / FILE: A worker walks past rows of cannabis plants growing in a greenhouse at the Hexo Corp. facility in Gatineau, Que., On Oct. 11, 2018. / Photo by Chris Roussakis / Bloomberg

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“48North’s innovative product portfolio complements HEXO’s existing brands, which together with their additional market penetration will further strengthen HEXO’s position in the Canadian market,” said Sebastien St-Louis, CEO and co-founder of HEXO, in the statement.

Assuming both the 48North and Zenabis Global Inc. transactions are complete, “based on its most recent financial reports and results, the combined organization would be among the leading licensed manufacturers for combined Canadian leisure sales,” reports HEXO .

The move to include 48North and its current bath and intimacy products will diversify HEXO’s existing adult cannabis portfolio and provide “a strong foundation for potential future CPB partnerships in the US, Canada and internationally.”

FILE: A participant who appeared at the Hexo Corp. booth.  pictured during the Montreal Cannabis Expo on October 26, 2018.  / FILE: A participant who appeared at the Hexo Corp. booth. pictured during the Montreal Cannabis Expo on October 26, 2018. / Photo by Christinne Muschi / Bloomberg

In addition, the transaction offers cost savings. According to St-Louis, the deal could offer positive synergies worth up to $ 12 million within a year of HEXO’s tight and ideal position to continue our national and international growth strategy.

These savings are expected to come “through cost reductions, additional capacity utilization at HEXO’s Belleville Center of Excellence and sales, general and administrative savings,” the statement said.

“Like HEXO, 48North believes that the combination should offer significant synergies, a stronger financial position and greater flexibility, and enable the combined company to meet growing consumer demand on a national basis,” said Charles Vennat, CEO of the licensed manufacturer 48North.

FILE: The guests gathered around the 48North booth.  /. FILE: The guests gathered around the 48North booth. /. Photo by CAFA

To be approved, at least two-thirds of the votes cast by 48North shareholders must be in the transaction. The transaction is also subject to certain regulatory, judicial and stock exchange approvals.

As with many other Canadian cannabis companies, acquisitions have become a cornerstone of Hexo’s growth plan. It announced that it would buy pot company Zenabis Global Inc. for $ 235 million in February.

The cannabis industry, both here at home and elsewhere, has been busy with news of mergers and acquisitions. Recent pairings included Tilray Inc.’s merger with Aphria Inc., Canopy Growth Corp., which acquired Supreme Cannabis and Ace Valley Cannabis, and, according to BNN Bloomberg, Sundial Growers Inc., which allegedly intends to acquire Inner Spirit Holdings Ltd. to buy.

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