Hexo (TSE:HEXO) Stock Rating Reaffirmed by CIBC

Cannabis producer HEXO buys out Newstrike in $263 million stock deal

When asked during the segment if Hexo is prepared to add a premium to the offer in order to get Newstrike shareholders on board, St-Louis said the company is "not interested in bidding wars".

This morning, Hexo Corp HEXO released Q2 2019 numbers and shares are now soaring 6% in pre-market trading.

This is a positive step for HEXO, as the acquisition gives the cannabis company the ability to produce around 150,000 kgs of high-quality cannabis a year. Hexo's stock gained 6.9 percent to C$7.87 at 2:24 p.m. Wednesday, while Newstrike rose 11 percent to 50 cents.

"Our strength in Ontario and English Canada clearly complements HEXO's strong position in Quebec and creates an industry leader", Jay Wilgar, CEO of Newstrike, said in a statement. The company expects $10 million in annual savings on the production and administrative side as a result of the merger, which remains subject to approvals from courts and regulators as well as Newstrike shareholders. Health Canada has issued licences to more than 100 entities under the Cannabis Act, and Up Cannabis is one of only seven with provincial agreements in at least seven provinces. The firm issued an underperform rating on the stock.

The Hexo-Newstrike deal is the latest sign of consolidation in Canada's cannabis sector, and not the only time firms have signaled an interest in the Ontario-based grower.

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"It was no secret that deals were being tabled in the week that our retail operators had to complete their retail operator license application", Brenna Boonstra, director of quality and regulatory consulting Cannabis Compliance, told INN.

Ontario cited a "national shortage" of regulated cannabis when it scaled back the rollout of brick-and-mortar outlets late a year ago to 50 across the province. In November 2017, CanniMed had announced an all-stock deal to acquire Newstrike.

Newstrike's HIP ticker symbol on the TSX Venture exchange references the company's branding partnership with Canadian rockers the Tragically Hip. Upon completion of the transaction, existing HEXO and Newstrike shareholders would own approximately 86% and 14% of the pro forma company, respectively, on a fully-diluted basis. 3 Sixty provides cannabis security consulting, guarding and secure transport security services to more than 500 customers and more than 60 licensed cannabis producers, including some of the world's largest, such as licensed producers owned by Canopy Growth Corporation.

The chief executive of Hexo Corp. says cannabis products have been slow to reach retailers because licensed producers "underestimated" the infrastructure needed to fulfill orders. HEXO Corp. (NYSE:HEXO) has diverse figures for different time frames; starting from week's performance it presents bullish trend of 8.97% in last five regular trading sessions. Hexo rose 6.63 percent and 5.81 percent in NY and Toronto, to finish with a closing price of US$5.92 and C$7.83.

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