NewStrike - The Expansion to 9 Provinces I do not see the NewStrike deal as being a bad one due to the additional provices it brought online and the top selling brands that were ported over to HEXO as part of the deal. It was valued at $235 Mil and considered undervalued at the time. It is literally impossible for HEXO to write off more than the value of the deal so whay Keeler is stating is fundamentally WRONG.
Supporting evidence of my view on this is as follows :
The purchase of NewStrike occurred on March 13, 2019
Link to Original News Release (March 13, 2019)
https://www.globenewswire.com/news-release/2019/03/13/1752363/0/en/HEXO-Corp-to-acquire-Newstrike-Brands-Ltd.html
The deal provided HEXO immediate access to an additional 8 provincial supply agreements across Canada including Alberta that had the highest number of stores rollout in the shortest period of time. IMHO that was a great move on the part of HEXO in order to ramp up sales in the shortest period of time.
NewStrike also brough in the Tragically Hip as a partner, which, at the time, was a great way to get exposure for the company. Since then all indications is that the Tragically Hip and NewStrike parted ways. In addition to the supply agreements and the marketing aspects and the provincial supply agreements NewStrike provide HEXO with the UP! product line of smokables. This brand today is one of HEXO's top selling products and continues to bring in healthy margins.
Many speculated that the NewStrike deal was undervalued (at the time) as the Cannabis sector was red hot back in 2019 however HEXO negotiated a discount deal on the merger
Link to Article Indicating that HEXO / NewStrike Deal Massively Undervalued
https://seekingalpha.com/article/4249310-hexo-corp-acquires-newstrike-brands-is-massively-undervalued
Due to slower than expected store rollouts in Canada and a lower need for Cannabis production space, HEXO opted to sell off one of the NewStrike facilities so that the money could be used for other operational purposes. Selling the facility also allowed HEXO to avoid the cost of maintaining the facility as it was not needed.
Times change, now HEXO has drinks rolled out and is making moves to expand operations into Europe and the US, additional growing space could very well be needed to support these new developments hence the moves to pick up smaller companies (again at discount prices) as well as expanding its product offerings.
The new acquisitions on the part of HEXO will increase their sales figures and hence demand higher prices from the market once the Zenabis and 48 North Deals complete. With the US talking about legalization now and so many states already having some level of legalization already in place it is not hard to say that it is just a matter of time before Federal level legalization is in place. HEXO is entering this market and appears to be ready to take this on... with award winning products, a diverse product offering and with the backing of it's partner Molson-Coors.