Canadian cannabis company Hexo Corp, a former partner of Molson Coors, has been acquired by Tilray Brands, Inc., in a deal valued at around $250 million, the company announced yesterday in its Q3 earnings report.
The move, expected to close in June, consolidates Tilray’s position as the largest Canadian cannabis producer by market share. The company has been allied with Hexo since taking on $211 million in debt last year, including $173 million in convertible debt from HT Investments.
According to a press release, after exercising that convertible note, Tilray plans to acquire Hexo for $56 million in an all-stock transaction.
“We view this transaction as building on strength in that it takes the proven value proposition of the successful strategic partnership that we forged with the Hexo team last year,” said Irwin Simon, Tilgray’s chairman and CEO, on an earnings call Monday. “And this enables us to fully leverage the combined power of our businesses. Together we have the assets and the operating expertise to build a stronger Canadian platform that takes advantage of clear opportunities to deliver stronger top line growth and increase our market share.”
Upon completion of the deal, Simon said Tilray intends to achieve additional cost savings of over $25 million annually.
Tilray, the world’s largest cannabis producer since its 2020 merger with Aphriaira, has actively pursued M&A opportunities across food and beverage in recent years while awaiting federal legalization of cannabis in the U.S. The company acquired craft breweries SweetWwater, Green Flash, Alpine, and Montauk Brewing Co., hemp-based food brand Manitoba Harvest, as well as Breckenridge Distillery. The producer’s partnership with Anheuser-Busch InBev to research THC and CBD infused drinks ended in 2022.
Meanwhile, Hexo launched a similar joint venture with Molson Coors in 2018, establishing a U.S. production base in Fort Collins, Colorado, in June 2021. Its first release, a three-SKU line of sparkling waters featuring 20mg CBD per 12 oz. can, was released that same year in Colorado, and then expanded to 16 additional states. The partnership ended last November.
Much of Tilray’s growth strategy has focused on positioning the brand to take a leading role in U.S. cannabis CPG upon its federal legalization.
“When federal cannabis legalization does occur, we will leverage these U.S. businesses into beverage alcohol and wellness, including their distribution and marketing networks to capture new expansive opportunities across the US and throughout the creation of a broad set of cannabis infused CPG brands.”
Tilray’s Q3 results missed analysts’ projections, reporting a net loss of $1.2 billion after posting a $52.5 million profit during the same period last year. Net sales of $145 million, a year-over-year decrease from $151.9 million.