Hexo CEO: Not interested in bidding wars, but always on the lookout for deals

Hexo Corp. (HEXO.TO) is buying Newstrike Brands Ltd. (HIP.V), the cannabis company backed by The Tragically Hip, in an all-stock takeover valued at $263 million.

Under the terms of the deal announced early Wednesday, Newstrike shareholders will be offered 0.06332 of a Hexo share for each share held. If the transaction goes through, Newstrike shareholders would own 14 per cent of the combined company. BNN Bloomberg previously reported that Newstrike was mulling a possible sale.

“We’re going to leverage the strong demand that we have for Hexo products and the production that we have – including an indoor grow at Newstrike – to really position ourselves as one of the top two Canadian cannabis companies, but then as a bid to get up into that top three global cannabis company by size,” Hexo CEO Sebastien St. Louis said in an interview with BNN Bloomberg’s Amber Kanwar Wednesday.

The deal is subject to standard regulatory approvals, including a vote by Newstrike shareholders. The agreement allows for a $7.5-million break fee payable by Newstrike in certain circumstances.

St. Louis said talks with Newstrike began in November.

“Hexo is not interested in bidding wars, and that’s why we’ve worked very closely with Newstrike management and the Hip in really aligning in vision before releasing any details of this deal,” St. Louis said. “We’re quite confident this deal will go through as is and be very accretive to on both sides.”

Hexo added in a press release that it is committed to achieving more than $400 million in net revenue in 2020.

Hexo is still on the lookout for more deals, especially as it looks to expand internationally, including into the U.S., St. Louis said.

“We’re always on the lookout for more deals,” he said. “Canada is just the first launching point, and, in typical Hexo fashion, we take it one step at a time.”

Editor's Note: A chart in this interview misidentifies Hexo as being listed on the Venture, when in fact it's on the TSX. BNN Bloomberg regrets the error.