Marijuana company Tilray closes Hexo acquisition, eyes cost savings

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Cannabis and beverage alcohol company Tilray Brands has closed its acquisition of Canadian cannabis producer Hexo Corp., creating what Tilray described as “Canada’s largest cannabis company by revenue.”

The completed acquisition, announced late Thursday, comes after Hexo shareholders approved the deal on June 14.

In April 2022, Tilray and Hexo inked a “strategic alliance” that saw Tilray acquire Hexo debt in exchange for the right to buy Hexo shares.

The subsequent acquisition deal was announced a year later, for an aggregate purchase price of roughly $56 million.

Holders of Hexo’s common shares have received 0.4352 Tilray share per Hexo share, and Tilray issued roughly 19.5 million common shares in relation to the acquisition.

Hexo “expects its common shares to be delisted from the TSX and the Nasdaq shortly,” said the company, now a Tilray subsidiary, in a news release.

Tilray said the acquisition solidifies its top market-share position in Canadian cannabis, and provides opportunities for the combined company to “optimize (its) sales, marketing, and distribution networks to strengthen Tilray’s commercial footprint and hasten market share growth.”

Cost savings are estimated to be “in excess of $27 million on an annualized pre-tax basis, driven by synergies across production, sales, marketing, distribution, and corporate savings, with potential incremental upside resulting from consolidating packaging, procurement, freight, and logistics.”

Both Tilray and Hexo are unprofitable: Hexo last week reported a net loss of 129.7 million Canadian dollars ($98 million) in its third quarter, while Tilray’s most recent quarterly net loss was $1.2 billion.

Shares of Tilray trade as TLRY on the Nasdaq and the Toronto Stock Exchange.