Quebec-based Hexo Corp. is shutting down three facilities and laying off staff as part of an integration plan following an acquisition spree it went on this year worth roughly 1.2 billion Canadian dollars ($960 million).
Hexo disclosed the planned closures and layoffs Tuesday in a corporate update.
Hexo is decommissioning facilities in:
- Kirkland Lake, Ontario, effective Jan. 31, 2022.
- Brantford, Ontario, effective Jan. 31, 2022.
- Stellarton, Nova Scotia, effective Feb. 28, 2022.
The Quebec company said some of the 155 affected workers could potentially be relocated to remaining facilities.
The Stellarton, Nova Scotia, facility slated for decommissioning came with its CA$235 million acquisition of rival producer Zenabis in February.
The Kirkland Lake and Brantford facilities joined Hexo in the CA$50 million acquisition of 48North in May.
They were the only facilities owned by 48North, which means Hexo effectively bought some brands and IP.
48North had 145 employees around the time it was acquired by Hexo. Zenabis had 564 employees, per regulatory filings.
No closures related to its CA$925 million deal for cannabis producer Redecan were announced in the corporate update.
In buying the three businesses, Hexo overextended itself.
The learning curve for entering the cannabis industry is steep. Start with the fundamentals.
MJBiz Cannabis 101 Email Course
A 10-part email course designed to educate new hires and aspiring professionals on the key fundamental areas of the legal cannabis industry, including:
- History of legal cannabis in America
- Overview of plant-touching + ancillary business sectors
- Cannabis finance and investing
- Cannabis marketing and brand building
- Employment + hiring opportunities
- And much more!
Gain a comprehensive understanding of this complex industry with this free resource.
In a six-page note accompanying Hexo’s annual consolidated financial statements in October, auditor PricewaterhouseCoopers warned of “substantial doubt” about the company’s ability to continue as a going concern.
“Existing funds on hand, when combined with operational cash flow, are not sufficient to fund existing debt repayments, capex budgets, and potential cash requirements under the Senior Secured Convertible Note,” the auditor warned.
The auditor added that management has been exploring several options to secure the necessary financing.
In October, Hexo appointed Scott Cooper, current head of its beverage joint venture, to CEO as a replacement for founder Sébastien St. Louis, who was recently shown the door.
It’s not the first time Hexo has closed an asset it recently acquired.
In 2019, Hexo bought Newstrike Brands for CA$263 million, along with its massive greenhouse in Niagara, Ontario, only to sell the property for CA$10.25 million less than one year later.
Shares of Hexo trade on the Nasdaq and Toronto Stock Exchange.
Matt Lamers can be reached at matt.lamers@mjbizdaily.com.
