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Tilray Takes Significant Stake In Rival Hexo

March 8, 2022

Leading Canadian cannabis producer Tilray has announced a partnership with Canadian rival Hexo Corp. Under the terms, Tilray will acquire up to $211 million of senior secured convertible notes issued by Hexo that are currently held by HT Investments and its related funds. The move functions as something of a bailout for Hexo, as it owes accrued and unpaid interest on the notes, which Tilray will pay 95% of in its stead. In exchange, the notes will be amended to give Tilray the right to convert them into a stake in the company, which could ultimately amount to approximately 37% of Hexo.

The agreement essentially unites the two companies and will deliver synergies and cost-saving advantages. The proposed alliance is expected to generate up to C$50 million ($39m) in synergies within two years of the transaction’s completion, to be shared between the two, including efficiencies in cultivation and processing services and form factors like pre-rolls, beverages, and edibles, as well as shared services and procurement. The companies also plan to share proprietary information, boosting innovation and product development. Upon closing, Tilray will nominate chief strategy officer Denise Faltischek for a position on Hexo’s board.

“We believe this proposed transaction would be a win-win for Tilray Brands and Hexo as it would launch a strategic partnership between two leading Canadian cannabis producers with complementary brand portfolios,” said Tilray CEO Irwin Simon. “For us, it provides a path for meaningful future equity ownership of Hexo, and enables us to participate in Hexo’s share price appreciation as it continues to execute on its growth initiatives.”—Danny Sullivan

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