Tilray Brands, Inc. (“Tilray Brands” or the “Company”) (Nasdaq |
TSX: TLRY) today announced that the Company has entered into
amendments to improve the terms of its previously-disclosed
agreements to acquire all of the outstanding principal, plus
accrued and unpaid interest, under a secured convertible note (the
“HEXO Note”) issued by HEXO Corp. (“HEXO”) to HT Investments MA LLC
(“HTI”). These amendments provide for, among other things, an
additional discount to Tilray Brands’ purchase price as well as the
reduction of the conversion price under the HEXO Note from CAD$0.85
to CAD$0.40 per share.
Irwin D. Simon, Tilray Brands’ Chairman and CEO,
said, “We believe HEXO continues to be the right strategic partner
for Tilray Brands in Canada and, therefore, look forward to closing
this transaction in July and working with HEXO to deliver on the
promise and the potential of this partnership for our shareholders,
consumers, and employees.”
Charlie Bowman, HEXO’s President and CEO, added,
“The strategic alliance with Tilray Brands accelerates HEXO’s
operational turnaround and unlocks capital to expand our market
leadership globally. The partnership is an essential next step in
improving our capital structure, and we’re confident that the
synergies realized will reset the industry.”
As previously announced, the strategic alliance
between Tilray Brands and HEXO is expected to provide several
financial and commercial benefits, including:
- Substantial
Synergies: the strategic alliance between Tilray Brands
and HEXO is expected to deliver up to $80 million of shared
cost-saving synergies within two years of the completion of the
Transaction. Both companies have already begun working on
evaluating operations and production efficiencies with respect to
cultivation and processing services, including pre-rolls, beverages
and edibles, as well as shared services and procurement. In
conjunction with the sharing of synergies, HEXO will pay Tilray
Brands an annual fee of $18 million for advisory services with
respect to cultivation, operation, and production matters.
- Accretion: as a
result of the substantial synergies, 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 will 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 share 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.
Upon closing, Tilray Brands will nominate two
directors to HEXO’s Board of Directors (“Board”)
and one Board observer.
Amended Transaction Details
Under the terms of the amended agreements, and
subject to the satisfaction of specific closing conditions, Tilray
Brands would acquire the HEXO Note from HTI, which includes 100% of
the current remaining $185 million outstanding principal balance of
the HEXO Note, plus any accrued and unpaid interest thereon. As
consideration for Tilray Brands’ acquisition of the HEXO Note,
Tilray Brands will pay 89.2% of the then outstanding principal
balance for the HEXO Note (the “Purchase Price”). This equates to a
10.8% discount on the outstanding principal amount. Until closing,
HTI may continue to redeem the HEXO Note pursuant to their terms;
however, in no event shall the outstanding principal balance of the
HEXO Note, when ultimately purchased by Tilray Brands, be less than
$160 million.
The initial conversion price of the HEXO Note
will be amended and adjusted down from CAD$0.85 to CAD$0.40 per
share (the “Conversion Price”). This implies that, as of June 13,
2022, Tilray Brands would have the right to convert into
approximately 50% of the outstanding common stock of HEXO (on a
non-diluted basis).
The Purchase Price shall be satisfied, in part,
by the issuance to HTI of a $50 million convertible unsecured note
(the “Tilray Convertible Note”) and the balance in either cash or
Class 2 common stock of Tilray Brands or any combination thereof,
at Tilray Brands’ option. The Tilray Convertible Note will bear
interest at a rate of 4.00% per annum, calculated and paid on a
quarterly basis and maturing on September 1, 2023. HEXO will not
receive any proceeds as a result of Tilray Brands’ proposed
purchase of the HEXO Note from HTI.
The parties expect to close on or about July 15, 2022, and the
amended agreements also extend the outside date for closing the
transactions to August 1, 2022.
Commercial Agreements
As previously announced, Tilray Brands and HEXO
have also agreed to continue to work together to finalize and enter
into Commercial Agreements at the closing of the transactions on
mutually agreeable terms covering the following key areas (i)
Tilray Brands will complete production and processing as a
third-party manufacturer of products for HEXO (ii) HEXO will source
all of its cannabis products for international markets, excluding
Canada and the US, exclusively from Tilray Brands; and (iii) HEXO
and Tilray Brands will share savings on a 50:50 basis related to
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 will also provide that HEXO pay Tilray Brands an annual
fee of $18 million for advisory services with respect to
cultivation, operation and production matters.
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: the Company’s
successful closing of the transactions as well as satisfaction of
the transaction conditions generally; the Company’s issuance of the
Tilray Convertible Note; accretion related to acquisition of the
HEXO Note; 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 information form of Tilray
Brands and the 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:
Tilray BrandsMedia: Berrin Noorata, news@tilray.comInvestors:
Raphael Gross, +1-203-682-8253, Raphael.Gross@icrinc.com
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