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From Hiku’s perspective, the deal brings a broader portfolio of products and widens its customer base. According to Gertner, it also provides Hiku with a production partner able to ramp up or slow down growing depending on pricing pressures in the coming years.

“The lease that WeedMD has with their Strathroy facility allows an immense amount of flexibility for the combined Hiku business to both produce vertically integrated product, but to remain flexible,” said Gertner. “Ultimately we believe in a thesis that wholesale prices will go down, so we want to be able to switch on and switch off our ability to grow a substantial amount of cannabis.”

Hiku’s main focus is on cannabis retailing, and the company hopes to have between 20 and 30 retail locations open by the end of the year in provinces, including Alberta, Manitoba and Newfoundland and Labrador, that allow private dispensaries.

The deal with WeedMD is the first sizable Canadian cannabis merger in several months.

During the trading frenzy that gripped the market at the beginning of the year, two massive M&A deals — between Aurora Cannabis Inc. and CanniMed Therapeutics Inc. on the one hand and Aphria Inc. and Nuuvera Inc. on the other — had commentators predicting more mergers would follow in short order. M&A activity has not, however, happened en masse, as the market remains sluggish for the third month in a row.

Trading of both WeedMD and Hiku stock was halted for most of Thursday. After trading resumed in the afternoon, WeedMD shares shot up 25 per cent from $1.61 to $1.98. Hiku’s stock declined 5.6 per cent from $1.85 to $1.68.