It appears that Tilray Brands (TSX: TLRY) may ultimately end up with a larger stake in Hexo Corp (TSX: HEXO) than previously expected via the purchase of certain outstanding debt. The two parties this morning announced amendments to the previously announced transaction, which appear on the surface to significantly benefit Tilray.
The amendments will see the debt purchased by Tilray from HT Investments have a significantly lower conversion price than previously agreed to. Under the prior arrangement, debt was to convert at a price of $0.85 per Hexo share. However, in light of “challenging stock market conditions,” Hexo has agreed to modify the conversion price to just $0.40 per share – meaning that upon full conversion, Tilray may own more than twice as many shares in the company than previously expected.
With roughly $185 million still outstanding on the secured note, this implies that the debt could convert into as much as a 50% stake in Hexo. That figure was previously estimated to be just 35% – and sure beats the up to $3.00 per share that the company previously considered acquiring Hexo for.
As part of the conditions of closing, Tilray Brands is to issue a $50 million convertible unsecured note to HT Investments in partial payment of the debt. The note is to bear interest at 4% per annum, maturing on September 1, 2023. The debt is to be purchased for a 10.8% discount to the total figure owing.
The transaction is now slated to close by July 15.
Tilray Brands last traded at $4.03 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.
