Please ensure Javascript is enabled for purposes of website accessibility

HEXO Acquiring Zenabis Global for $186 Million

By Eric Volkman - Updated Feb 16, 2021 at 4:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The deal is the latest of several mergers and buyouts announced in the marijuana industry.

In what isn't the first, and likely won't be the last, marijuana industry acquisition of 2021, HEXO (HEXO -0.93%) announced Tuesday that it is acquiring a peer company, Zenabis Global (ZBISF). The price is 235 million Canadian dollars ($186 million), which will be paid entirely in HEXO stock.

Specifically, Zenabis stockholders will receive nearly 0.02 of a share of HEXO for each Zenabis share they own. According to HEXO, this represents a premium of 19% on a 20-day volume-weighted average share price for Zenabis stock.

Hand making OK sign in front of marijuana plants.

Image source: Getty Images.

In its press release trumpeting the new asset buy, HEXO ticked off several advantages it says it will enjoy by absorbing Zenabis.

First, it claims that this will make it one of the top three licensed Canadian marijuana producers, in terms of recreational weed sales. It will also hook HEXO into the small but growing medical marijuana market abroad, as Zenabis in 2020 won approval to export its product to the European Union.

Perhaps most importantly, owning Zenabis would add over 2.7 million square feet of cultivation space for HEXO, more than doubling its recent tally.

But Zenabis shares one bad trait with HEXO: It consistently books bottom-line losses. In the first nine months of 2020, its shortfall was CA$40.5 million ($32 million).

HEXO's news comes shortly after two other marijuana industry mergers/acquisitions were announced, specifically Aphria's merger with Tilray, and Jazz Pharmaceuticals' buyout of GW Pharmaceuticals, a developer of cannabis-based medications.

The HEXO/Zenabis deal requires the approval of two-thirds of the latter's shareholders, and is subject to approval by the relevant regulatory bodies. It has already been approved by the boards of both companies.

Investors like this move; on Tuesday, HEXO was up by more than 22%, in sharp contrast to the flat performance of the S&P 500 index.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

HEXO Stock Quote
HEXO
HEXO
$0.25 (-0.93%) $0.00
Jazz Pharmaceuticals plc Stock Quote
Jazz Pharmaceuticals plc
JAZZ
$149.14 (4.31%) $6.16
GW Pharmaceuticals plc Stock Quote
GW Pharmaceuticals plc
GWPH
Tilray Stock Quote
Tilray
TLRY
Aphria Stock Quote
Aphria
APHA
Zenabis Global Inc. Stock Quote
Zenabis Global Inc.
ZBISF

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.