Hexo Corp (TSX: HEXO) (NYSE: HEXO) late last night announced that it is in discussions to acquire yet another licensed producer within the Canadian cannabis landscape. The announcement was made following the news that the company has closed on US$360.0 million in aggregate principal of senior secured convertible notes.
The notes themselves were sold for a purchase price of US$327.6 million, which amounts to 91% of the principal amount of the notes. The notes bear no interest unless in the case of a default, and are convertible into free trading shares of the company at an unspecified price.
The notes mature May 1, 2023, and any unconverted notes are to be repaid at a price of 110% of the face value. Finally, the notes are secured by a first priority lien on all of Hexo’s assets. The debt was taken down by an undisclosed institution and its affiliates within the US.
Net proceeds from the financing are to be used to fund the potential acquisition of “a large Canadian licensed producer,” for which a definitive agreement has not yet been entered into. The announcement follows the company entering definitive agreements to acquire Zenabis Global (TSX: ZENA), and 48North Cannabis (TSXV: NRTH). Both of those acquisitions however took the form of all-stock transactions, suggesting that the latest target may not be a currently public operator.
Whomever it is, it appears that they may be financial prudent to some extent, with the late stage discussions evidently held up until this point “unless and until the Company has demonstrated sufficient cash resources on ‎hand to satisfy the ‎anticipated cash portion of the purchase price.”
Hexo Corp last traded at $7.90 on the TSX.
Information for this briefing was found via Sedar and Hexo Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
