HEXO (NASDAQ:HEXO) continues its spate of acquisitions, picking up its third business in five months after agreeing to acquire Canadian cannabis producer Redecan for $765 million.
The purchase will make HEXO the volume leader in dried flower, adding to its leading position atop the cannabis-infused beverage market through its Truss Beverages joint venture with Molson Coors (NYSE:TAP).
The cash and stock deal marks the third time in 2021 that HEXO has gone after a company to bolster its growth potential and positioning. In February, it acquired Zenabis Global (OTC:ZBISF) for $186 million, payable all in HEXO stock, and two weeks ago, it bought 48North Cannabis (OTC:NCNNF) in another all-stock deal, but this one for just $41 million.
HEXO's stock is up 77% so far this year, making it a more attractive way to pay for these businesses. The acquisition of Redecan, however, is more substantial.
According to the announcement, Redecan is Canada's largest privately owned licensed producer of recreational marijuana. It gives HEXO the opportunity to more effectively compete against other licensed producers by offering consumers a broader selection of high-quality product.
HEXO says it previously laid out a plan to become a top-three producer in the Canadian market, but CEO Sebastien St-Louis said the Redecan purchase taps it to be "on the verge of surpassing that objective to become the No. 1 licensed producer by recreational market share."
Moreover, HEXO intends to leverage Redecan's capabilities to position the company to eventually expand further into the U.S. market.
Approximately $330 million of the purchase price will be paid in cash, and the company will issue about $434 million in stock for the balance. HEXO expects the transaction to close in the third quarter.