Article by Angela Stelmakowich, Growth Op
HEXO Corp., a consumer packaged goods (CPG) cannabis company, is looking to cement a top-two position in the Canadian recreational weed space by acquiring all shares of 48North Cannabis Corp. for $50 million.
The companies announced today that they have reached a definitive agreement in which HEXO will acquire all of 48North’s issued and outstanding common shares in an all-share transaction.
Specifically, the agreement would see 48North shareholders receive 0.02366 of a HEXO common share in exchange for each 48North common share held. Members of HEXO and 48North boards of directors have unanimously approved the transaction, with the latter recommending that its shareholders vote in favour.
“48North’s innovative product portfolio complements HEXO’s existing brands which, combined with their additional market penetration, will further strengthen HEXO’s position in the Canadian market,” Sebastien St-Louis, CEO and co-founder of HEXO, says in the statement.
Assuming completion of both the 48North and Zenabis Global Inc. transactions, “the combined organization would be among the leading licensed producers in terms of combined Canadian recreational sales, based on their most recent financial statements and results,” HEXO reports.
The move to absorb 48North and its topicals, bath and intimacy products helps to diversify HEXO’s existing adult-use cannabis portfolio, thereby providing “a strong base for potential future CPB partnerships in the U.S., Canada and internationally.”
Additionally, the transaction offers cost savings. Indeed, says St-Louis, the “deal could offer up to $12 million worth of accretive synergies within one year following the close and ideally position HEXO to continue executing on our domestic and international growth strategy.”
It is anticipated those saving would be “through cost of goods reductions, additional capacity utilization in HEXO’s Belleville Centre of Excellence and selling, general and administrative savings,” the statement notes.
“Like HEXO, 48North believes that the combination should deliver meaningful synergies, a stronger financial position with increased flexibility, and should position the combined company to meet growing consumer demand on a national basis,” says Charles Vennat, CEO of licensed producer 48North.