Tilray Brands, Inc. (“Tilray Brands” or the “Company”) (Nasdaq |
TSX: TLRY), a leading global cannabis-lifestyle and consumer
packaged goods company inspiring and empowering the worldwide
community to live their very best life, today announced that the
Company has closed its previously-disclosed acquisition from HT
Investments MA LLC (“HTI”) of the secured convertible note (the
“HEXO Note”) issued by HEXO Corp. (“HEXO”).
Irwin D. Simon, Tilray Brands’ Chairman and CEO,
said, “We are excited to close on this strategic transaction and
alliance with HEXO, which is expected to provide several financial
and commercial benefits, including substantial cost-savings
synergies, increased strength in product innovation to capitalize
on for market opportunities in Canada and internationally, along
with the U.S., upon federal legalization. This is a unique
opportunity to realize our vision to enhance consumer experience
and lay the groundwork for the next evolution of Canadian
cannabis.”
Charlie Bowman, HEXO’s President and CEO, added,
“Closing this transaction with Tilray will provide HEXO with the
financial flexibility needed to accelerate our operational
turnaround and put us on the path to profitable growth. We are
confident that the savings and production efficiencies we are able
to realize between the two companies will reset the industry.”
Financial and Commercial
Benefits:
- Substantial
Savings: The strategic alliance between Tilray Brands and
HEXO is expected to deliver up to $80 million of shared
cost-savings within the next two years. Both companies have
identified operational and production efficiencies with respect to
cultivation and processing services, including pre-rolls, beverages
and edibles, as well as shared services and procurement.
- Accretion: As a
result of the substantial savings, as well as the annual advisory
fee, the acquisition of the HEXO Note by Tilray Brands will be
immediately accretive to the Company.
- Strengthening Product
Innovation in Canada and International Markets: Tilray
Brands and HEXO bring together industry leading expertise in the
global cannabis industry, including cannabis cultivation, product
innovation, brand building, and distribution. Leveraging both
companies’ commitment to innovation and operational efficiencies,
both companies will provide their respective expertise and know-how
to strengthen market positioning and capitalize on opportunities
for growth through a broadened product offering and accelerated CPG
innovation. These efforts will also provide benefits to the U.S.
market, upon potential federal legalization.
Transaction Details
Tilray Brands acquired the HEXO Note from HTI,
which has a current principal balance of $173.7 million
outstanding. The purchase price paid to HTI for the HEXO Note was
$155 million, reflecting a 10.8% discount on the outstanding
principal balance.
The conversion price of the HEXO Note of
CAD$0.40 per share, implies that, as of July 11, 2022, Tilray
Brands would have the right to convert into approximately 48% of
the outstanding common stock of HEXO (on a non-diluted basis).
The purchase price was satisfied, in part, by
Tilray Brands’ issuance to HTI of a new $50 million convertible
unsecured note (the “Tilray Convertible Note”) and approximately
33.3 million shares in Class 2 common stock of Tilray Brands. The
Tilray Convertible Note bears interest at a rate of 4.00% per
annum, calculated and paid on a quarterly basis and matures on
September 1, 2023. HEXO did not receive any proceeds as a result of
Tilray Brands’ purchase of the HEXO Note from HTI.
Tilray Brands has nominated two directors to
HEXO’s Board of Directors (“Board”) and one Board
observer.
Commercial Agreements
Tilray Brands and HEXO also entered into certain
commercial agreements covering the following key areas; (i) each
party will complete production and processing as a third-party
manufacturer of certain products for the other party; (ii) HEXO
will source its cannabis products for international markets,
excluding Canada and the US, from Tilray Brands; and (iii) HEXO and
Tilray Brands will share savings related to specified facilities
optimization activities, procurement, general and administrative
costs, including insurance and certain shared services, and certain
production and processing activities for straight-edge pre-rolls,
edibles and beverages. The commercial agreements further provide
that HEXO shall pay Tilray Brands an annual fee of $18 million for
advisory services with respect to cultivation, operation, and
production matters.
Early Warning Reporting
Disclosure
In connection with Tilray Brands’ acquisition of
the HEXO Note, Tilray Brands announces, pursuant to applicable
requirements of Canadian securities laws, that it has acquired the
right to convert the HEXO Note into approximately 48% of the
outstanding common stock of HEXO, on a non-diluted basis (the
“Acquisition”). Prior to the Acquisition, Tilray Brands did not
beneficially own or control any of the common stock of HEXO.
Tilray Brands completed the Acquisition for
investment purposes and for strategic reasons, including in
connection with its negotiation around the commercial agreements
which will enable the realization of shared cost-saving synergies
and the other benefits described above.
Although not in its present plans, from time to
time, Tilray Brands may hold discussions with HEXO’s management,
its board of directors, other stockholders, and other relevant
parties concerning the business, operations, board composition,
management, strategy and future plans of HEXO. Depending on various
factors including, without limitation, the results of any such
discussions, HEXO’s financial position and business strategy, the
status of the HEXO Note, the availability of securities of HEXO
that would make the purchase of such securities desirable,
conditions in the securities market and general economic and
industry conditions, other investment opportunities, the liquidity
requirements of Tilray Brands, and so forth, Tilray Brands may
consider from time to time various alternative courses of action
with respect to increasing or decreasing its ownership, control or
direction over HEXO securities. Tilray Brands reserves the right to
acquire (whether by conversion of the HEXO Note or otherwise)
additional securities of HEXO, including without limitation Common
Shares, and/or to dispose of any or all of its interests under the
HEXO Note (or any securities of HEXO acquired in connection with
the conversion of the HEXO Note). There can be no assurances that
Tilray Brands will pursue or consummate any of these transactions.
Any such transaction referred to in this paragraph would be made in
compliance with all applicable laws and regulations.
A copy of the early warning report required to
be filed by Tilray Brands in connection with the acquisition will
be filed on SEDAR and made available under HEXO’s issuer profile on
SEDAR at www.sedar.com.
About Tilray Brands
Tilray Brands, Inc. (Nasdaq: TLRY; TSX: TLRY),
is a leading global cannabis-lifestyle and consumer packaged goods
company with operations in Canada, the United States, Europe,
Australia, and Latin America that is changing people's lives for
the better – one person at a time. Tilray Brands delivers on this
mission by inspiring and empowering the worldwide community to live
their very best life and providing access to products that meet the
needs of their mind, body, and soul while invoking wellbeing.
Patients and consumers trust Tilray Brands to deliver a cultivated
experience and health and wellbeing through high-quality,
differentiated brands and innovative products. A pioneer in
cannabis research, cultivation, and distribution, Tilray Brands’
unprecedented production platform supports over 20 brands in over
20 countries, including comprehensive cannabis offerings,
hemp-based foods, and craft beverages.
For more information on Tilray Brands, visit
www.Tilray.com and follow @Tilray
Cautionary Statement Concerning
Forward-Looking Statements
Certain statements in this communication that
are not historical facts constitute forward-looking information or
forward-looking statements (together, “forward-looking statements”)
under Canadian securities laws and within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, that are intended
to be subject to the “safe harbor” created by those sections and
other applicable laws. Forward-looking statements can be identified
by words such as “forecast,” “future,” “should,” “could,” “enable,”
“potential,” “contemplate,” “believe,” “anticipate,” “estimate,”
“plan,” “expect,” “intend,” “may,” “project,” “will,” “would” and
the negative of these terms or similar expressions, although not
all forward-looking statements contain these identifying words.
Certain material factors, estimates, goals, projections or
assumptions were used in drawing the conclusions contained in the
forward-looking statements throughout this communication.
Forward-looking statements include statements regarding our
intentions, beliefs, projections, outlook, analyses or current
expectations concerning, among other things: accretion related to
the HEXO transactions; expected production efficiencies,
strengthened market positioning and potential cost saving synergies
resulting from the transactions and agreed commercial arrangements;
the Company’s ability to commercialize new and innovative products;
and HEXO management’s stated expectations for its operational
turnaround and growth in global markets. Many factors could cause
actual results, performance or achievement to be materially
different from any forward-looking statements, and other risks and
uncertainties not presently known to the Company or that the
Company deems immaterial could also cause actual results or events
to differ materially from those expressed in the forward-looking
statements contained herein. For a more detailed discussion of
these risks and other factors, see the most recently filed Annual
Report on Form 10-K (and other periodic reports filed with the SEC)
of Tilray Brands made with the SEC and available on EDGAR. The
forward-looking statements included in this communication are made
as of the date of this communication and the Company does not
undertake any obligation to publicly update such forward-looking
statements to reflect new information, subsequent events or
otherwise unless required by applicable securities laws.
For further information:Media:
Berrin Noorata, news@tilray.comInvestors: Raphael Gross,
+1-203-682-8253, Raphael.Gross@icrinc.com
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/40bf3659-82be-43c5-ad23-792060504d85
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