VLNCF - Hexo: The Newstrike Mistake

Source: Author based on company filings.

Field of Dreams

In March 2019, Hexo (HEXO) announced a $263 million all-stock acquisition of Newstrike Brands. The primary benefits of the deal were three fold:

• Hexo would gain Newstrike's state-of-the-art cultivation infrastructure and their premium indoor facility, increasing Hexo's total planned capacity to 150,000 kilograms/year of cultivation.
• Hexo would gain Newstrike's distribution agreements with the provinces of Alberta, Saskatchewan, Manitoba, Nova Scotia, and Prince Edward Island. Prior to this agreement, Hexo only had distribution agreements in Quebec, Ontario, and British Columbia.
• Hexo would benefit from accretive synergies