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Tilray Acquires HEXO Corp.

Consumer packaged goods company Tilray Brands is acquiring licensed producer HEXO Corp., the company announced earlier this month. Tilray will acquire all of the issued and outstanding common shares of HEXO it doesn’t own by paying US$56 million.

It will exercise the US$173 million secured convertible note it acquired from HEXO’s former creditor HT Investments MA LLC in July 2022. HEXO shareholders will receive 0.4352 Tilray shares for each HEXO share that they own, pricing HEXO shares at US$1.25 per share.

HEXO’s news release detailed reasons behind the acquisition, including there was substantial doubt that HEXO could meet its financial obligations. The company has a significant working capital deficiency and reduced cash and cash equivalents. Despite its best efforts, HEXO was unable to secure any form of public or private equity or debt financing to alleviate its near-term liquidity issues.

The deal is expected to close in June 2023. The HEXO transaction is poised to substantially increase Tilray’s revenue.

Tilray also announced its third quarter fiscal year 2023 financial results. The company delivered $145.6 million in net revenue, compared to $144.1 million in the prior quarter, maintaining its reported #1 cannabis market share position in Canada.

The company saw a gross loss of $11.7 million. Adjusted cannabis gross profit increased to $22.2 million from $18.0 million in the prior year quarter, while adjusted gross margin percentage increased to 47% from 33%.

In the third quarter, the company says it made substantial strides across its five craft-beverage brands, including leaders SweetWater Brewing Company, Breckenridge Distillery, and Montauk Brewing company, and its wellness brand Manitoba Harvest.

In a statement, Irwin D. Simon, Tilray’s Chairman and CEO said, “Looking ahead, we are focused on being the leading, most diversified cannabis lifestyle and CPG company in the world. Our strategy to deliver on this vision is centered on pursuing targeted growth opportunities, as reflected in our opportunistic acquisitions of both Montauk Brewing Company and HEXO, which has made significant strides in driving operating efficiency and improving profitability while continuing to invest in industry-leading brands.”

The HEXO deal is expected to bolster Tilray’s position supported by low-cost operations and complementary distribution across Canada. The company is also focused on growing its market share in medical cannabis, particularly in Europe.

Tags: Cannabis Industry (183), cannabis mergers and acquisitions (5), Cannabis Retail (394), HEXO Corp. (1), Irwin Simon (1), licensed producer (7), Tilray (7)