7 Key Takeaways Investors Need To Know Ahead Of HEXO Corp’s Acquisition Of Zenabis

Although the merger of Aphria and Tilray (TLRY.TO) (TLRY) has been the most highly talked about topic in the cannabis industry, HEXO Corporation’s (HEXO.TO) (HEXO) acquisition of Zenabis Global Inc. (TSX: ZENA) has flown under the radar. 

For clear reasons, the deal between Aphria and Tilray is more significant than HEXO’s acquisition but we believe that our readers need to understand why leading proxy advisors Institutional Shareholders Services and Glass Lewis recommend that Zenabis shareholders vote in favor of the deal. 

Today, we want to highlight 7 of the key takeaways from Institutional Shareholders Services (ISS) and Glass Lewis’ recommendation and will monitor how the story advances from here. The reasons the firms recommended investors to vote in favor of the deal include:

1. It has fairly clear scale and synergy benefits
2. The combined company will have a stronger balance sheet when compared to Zenabis as a stand-alone business
3. The deal is expected to provide enhanced flexibility as it relates to managing its capital structure and finances
4. The enhanced operating leverage and scale that is provided from HEXO is expected to offer more upside potential to Zenabis 
5. The transaction is consistent with Zenabis’ established effort to improve its balance sheet positioning
6. The acquisition offers Zenabis shareholders upside to current levels
7. The combined company may realize annual synergies of approx. $20 million within one year of closing the deal through cost of goods reductions and additional capacity utilization.

The recommendations come before Zenabis holds a planned Special Shareholder meeting on May 13th. We will monitor the trend ahead of the planned vote on the acquisition and will keep you updated on any important developments from here.

If you are interested in learning more about HEXO’s acquisition of Zenabis, please send an email to support@technical420.com with the subject “HEXO and Zenabis” to be added to our distribution list. 

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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