Hexo Higher on Accord to Buy Cannabis Rival 48North

Hexo agreed to buy cannabis rival 48North for stock valued at C$50 million (US$41.3 million).
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Hexo  (HEXO) - Get Report agreed to acquire rival cannabis company 48North NCNNF in a stock swap valued at about C$50 million (US$41.3 million).

The U.S.-listed shares of Hexo, Ottawa, at last check rose 1.7% to $6.17. The U.S. shares of 48North, Toronto, were off 2.8% at US$0.136.

The deal is part of Hexo's effort to become a top-two cannabis provider in Canada for adult-use sales, Sebastien St-Louis, co-founder and chief executive of Hexo, said in a statement.

Under the terms, Hexo will swap 0.02366 share for each 48North share. That equals a premium of 20% based on the 10-day volume-weighted-average price of 48North and Hexo at the close of markets on May 14.

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The directors and officers of 48North, as well as certain of the company's other holderes, have committed to vote a total of 25.9% of 48North’s shares in favor of the transaction.

At closing, Hexo holders will own 96% of the combined company's shares and 48North holders 4%.

Hexo said the deal could provide $12 million of potential synergies within a year after it closes.

Both companies' boards have approved the terms. The Hexo-48North deal is expected to close on June 1, subject to conditions including court, regulatory and stock-exchange clearances, the companies said.

48North has the right to accept a higher bid in certain circumstances. Hexo would have five business days to match such a proposal. And 48North would pay Hexo C$2 million if the deal is terminated under certain conditions.

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