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TORONTO — The cannabis company backed by members of the Tragically Hip band has agreed to a friendly takeover by Quebec-based HEXO Corp. in an all-share transaction valued at $263 million, sending shares of both companies higher.

The companies say in a joint statement the deal would give HEXO the capacity to produce about 150,000 kilograms of cannabis annually and to realize $10 million of annual synergies.

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HEXO chief executive Sebastien St-Louis, who co-founded the company, said the addition of Newstrike would to take HEXO to the next level on its journey “to become one of the largest cannabis companies in the world.”

“We’re extremely proud of our record of execution, and today are committing to achieving over $400 million in net revenue in 2020,” St-Louis said in a statement.

Shares of HEXO in Toronto were up nearly six per cent in afternoon trading to $7.83 after the deal was announced. On the TSX Venture exchange, Newstrike’s stock was up more than 11 per cent in afternoon trading to 50 cents a share.