HEXO Corp. Just Validated The Thesis That The Great Canadian Cannabis Consolidation Is Just Getting Started

Earlier this month, we highlight the consolidation trend that we have seen in the legal cannabis industry as the trend has shown no signs of slowing down.

HEXO Corporation (TSX: HEXO) (NYSE: HEXO) is a Canadian Licensed Producer (LP) that has been highly focused on making strategic acquisitions that will prove to be immediately accretive.

Earlier this week, HEXO announced a definitive arrangement to acquire 100% of 48North Cannabis Corp (TSX-V: NRTH). The all-stock transaction values 48North at approximately $50 million (on an enterprise value basis) and we will monitor how the deal benefits HEXO over the short and long-term.

By acquiring 48North, HEXO’s management team is working to execute on a strategy to become a leading recreational cannabis operator in Canada. According to HEXO CEO and co-founder Sebastien St-Louis, 48North’s product portfolio complements HEXO’s existing brands and is expected to further strengthen HEXO’s position in Canada and could provide up to $12 million worth of accretive synergies within one year of closing the deal.

48North has an expansive portfolio of premium cannabis products and its management team expects the business combination to deliver meaningful synergies, a stronger financial position, and should position the combined company to capitalize on increasing consumer demand for cannabis.

48North’s product offering provides a strong base for potential future consumer packaged goods (CPG) partnerships in the US, Canada, and internationally. We will monitor how the transaction is received by shareholders and the deal is expected to be voted at a special shareholder meeting.

Over the next year, we expect to see additional acquisitions by leading Canadian LPs. Some of the companies that should be a beneficiary of this include: Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC), Aurora Cannabis Inc. (TSX: ACB) (NYSE: ACB), and Organigram Holdings Inc. (TSX: OGI) (NYSE: OGI).

If you are interested in learning more about companies that should benefit from continued consolidation, please send an email to support@technical420.com with the subject “Canadian LP Consolidation” 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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