HEXO stock is on the rise since last Thursday, when Newstrike shareholders "overwhelmingly" voted in favor of HEXO's (NYSE:HEXO)(TSX:HEXO) planned acquisition of Newstrike Brands (TSXV:HIP)(OTCPK:NWKRF).
In reaction to the news, HEXO stockholders pushed shares above the $7.35 mark, but now that price has corrected with shares currently trading for $6.92 USD.
HEXO Stockholder Reaction
Under the terms of the acquisition, Canada's HEXO "will acquire all of Newstrike's issued and outstanding common shares by way of a plan of arrangement under the Business Corporations Act."
HEXO announced the acquisition of Newstrike in March. The deal required approval by at least 66% of the voting shareholders—it received 97.6% of the votes cast.
Now the companies are awaiting the approval of the Ontario Superior Court of Justice and the deal can officially close. This decision is expected on May 24th, 2019.
Once the arrangement is complete, Newstrike will become a wholly-owned subsidiary of HEXO and will stop trading on the TSX.
HEXO Stock and the Newstrike Acquisition
As stated, the acquisition was first announced in March. HEXO paid out a cool $263 million CAD for the Toronto cannabis producer and shares soared on the news.
One of the reasons investors were on board from the get-go was the increase in production capacity that this take-over afforded HEXO.
In acquiring Newstrike Brands, it added over 1/3 to its production capacity.
The Motley Fool, broke down the figures, saying the deal adds “470,000 square feet of production capacity to the more than 1.3 million square feet of cultivation space [that HEXO] already has.”
HEXO Stock - A Lot Of Capacity For A Low Price
Now, HEXO is set to be the sixth largest cannabis grower in North America—and this is a big deal for a mid-tiered company with a market cap just short of $2 billion CAD. Prior to this deal, HEXO estimated an annual output of 108,000 kilos; now it’s estimating 150,000 kilos at its peak.
Newstrike is the parent company of UP Cannabis Inc.—a licensed cannabis producer with supply deals across 8 Canadian provinces. As such, HEXO's domestic supply deals will be further cemented.
What do you think of the deal? Are you a fan of HEXO stock?
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