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Newstrike currently has two cannabis facilities in Ontario — an indoor grow room in Brantford, and a greenhouse in Niagara. Both facilities are licensed to cultivate and sell cannabis for the recreational market under the UP Cannabis brand. Newstrike’s most recent quarterly report ending Sept. 30, 2018 showed that the company realized a revenue of just over $3.4 million to the adult-use market.

“We’ve always recognized that to become a dominant player in the Canadian cannabis sector we needed a strong partner,” said Newstrike CEO Jay Wilgar. “You look at our partnership with the Hip, with the Neal Brothers and then you look at HEXO’s partnership with Molson Coors… putting these two companies together makes an enormous amount of sense.”

Photo by Courtesy of David Bastedo

HEXO is one of very few pot firms that have struck coveted deals with alcohol, tobacco and pharmaceutical companies over the last six months — Cronos Group announced a $2.4 billion investment from tobacco giant Altria Group last December, while Tilray Inc. partnered up with Swiss drug giant Novartis AG around the same time to develop and distribute medical cannabis.

Both Wilgar and St. Louis are confident that the merger of both companies will generate a combined revenue of $400 million by mid-2020.

“Everytime we have committed something to the market, we have delivered. We announced that by December 2018 we would have 1 million square foot up and running, and we met that promise and we got all our licenses in under a year,” St. Louis said.

Wilgar declined to elaborate on what his specific role would be post-acquisition, but maintained that he would continue to be actively involved in Newstrike.

HEXO’s stock price closed at $7.40 Tuesday evening, while Newstrike’s hovered at the $0.45 mark. The Quebec company’s acquisition of Newstrike is the second big transaction to take place between cannabis companies post-legalization — in December, Aleafia Health Inc. acquired medical cannabis producer Emblem Corp. for $173 million.