Leamington, Ontario-based Tilray Brands will acquire its troubled Canadian rival Hexo for $56 million.

The deal follows moves last year that brought the two companies into alignment when Tilray bailed out Hexo, paying off nearly $150 million of debt in exchange for shares and exercisable rights totaling a nearly 50% stake in the company, along with two seats on Hexo’s board. The new acquisition arrangement will be completed on a stock basis and is expected to close in June, pending approval.“As we began working with Tilray last year, the value that could be achieved through the combination of our businesses in order to compete and drive profitable growth in the highly fragmented Canadian market was immediately clear,” said Hexo chairman Mark Attanasio. “With the recent headwinds in the cannabis industry, our board determined that Hexo shareholders would benefit from being part of Tilray’s diversified business.”

For its fiscal quarter ended February 28, Tilray reported net revenue of $145.6 million, up marginally from $144.1 million the quarter before. Net revenue from cannabis sales totaled $47.5 million, down from $55 million in the same period last year. Distribution revenue grew to $65.4 million and beverage alcohol revenue grew slightly to $20.6 million. Tilray also recorded a non-cash net asset reduction of $1.1 billion resulting from higher interest rates and a decline in market capitalization. The company noted that this charge does not affect its cash flow or available liquidity. Tilray recorded its 16th consecutive quarter of positive adjusted EBITDA, at $14 million.

“We are focused on being the leading, most diversified cannabis lifestyle and CPG company in the world,” said Tilray CEO Irwin Simon. “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. At the same time, we will continue our relentless focus on cost and operational efficiencies and strengthening our industry-leading balance sheet to deliver sustained, profitable growth and shareholder value.”—Danny Sullivan