Tilray Brands Inc., a leading Canadian cannabis producer, is set to acquire rival Hexo Corp. in a deal worth about $250 million. The announcement is expected to be made following Tilray’s latest quarterly results. According to sources familiar with the matter, Tilray will exercise the secured convertible note it acquired from Hexo’s former creditor HT Investments MA LLC for $173 million to obtain roughly 49% of Hexo’s equity. Tilray will then pay $75 million to acquire the remaining outstanding shares.
The acquisition will enable Tilray to increase its market share in the Canadian cannabis industry to 13%, up from its current 8.1% control, according to Hifyre. The Leamington, Ontario-based company has been a dominant force in the industry since its merger with Aphria Inc. in December 2020.
Strategic Partnership with Hexo
This is not the first time that the two companies have partnered. In April 2022, Hexo and Tilray announced a strategic partnership that aimed to generate as much as $80 million in various efficiencies through shared services and other production agreements. The deal also included an equity purchase agreement valued at $180 million, which provided Hexo with additional capital for operations.
Market Challenges
Since the partnership agreement was made, cannabis producers have collectively reduced the prices of their products to win over fickle Canadian consumers. The market is inundated with similar options at legal licensed retailers. Smaller suppliers have lowered their prices so much that it has had a detrimental effect on the market.
Final Approval
The deal will be subject to a vote by Hexo’s shareholders, but one of the sources stated that the company’s largest shareholders have already given their approval, and the deal is expected to close quickly.
In conclusion, Tilray’s acquisition of Hexo is a significant development in the Canadian cannabis industry, as it further consolidates the market. This acquisition will undoubtedly benefit Tilray by increasing its market share, and it will be interesting to see how the company positions itself in the industry moving forward.
