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HEXO stock soars after Newstrike acquisition

The all-stock agreement is valued at C$263 million
The final puzzle piece about to be placed in a space that says 'acquistion'
HEXO is hoping for $400 million in net revenue in fiscal 2020 from the Newstrike deal

HEXO Corp (NYSEAMERICAN:HEXO) entered into an agreement to buy Newstrike Brands Ltd (TSX:HIP) (OTC:NWKRF) in an all-stock deal worth C$263 million. the company announced Wednesday.

The deal gives the medical and adult-use cannabis producer an additional capacity of about 150,000 kg of cannabis annually and expand its distribution reach to eight Canadian provinces. The Gatineau, Quebec-based company will also gain access to four production campuses featuring nearly 1.8 million square feet of cultivation space.

Shares jumped 6.7% to $5.95 in New York.

READ: Buds & Duds: HEXO, Weekend Unlimited lead a surging cannabis sector

HEXO expects the deal to boast annual benefits of $10 million and hopes to achieve more than $400 million in net revenue in fiscal 2020.

“With Newstrike, we're adding talented employees and infrastructure to take HEXO to the next level on our journey to become one of the largest cannabis companies in the world.” CEO and co-founder Sebastien St-Louis said. “We're extremely proud of our record of execution.”

As part of the deal, Newstrike shareholders will receive less than 0.1 HEXO common shares for every Newstrike common share they own.

Contact Andrew Kessel at [email protected]

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