HEXO Corp. (TSX:HEXO) entered into a definitive agreement to acquire Newstrike Brands Ltd. (TSXV:HIP) for approximately CAD 260 million on March 12, 2019. Under the terms of the arrangement agreement, Newstrike shareholders will receive 0.06332 of a HEXO common share in exchange for each Newstrike common share held. Upon completion of the transaction, existing HEXO and Newstrike shareholders would own approximately 86% and 14% of the pro forma company, respectively, on a fully diluted basis. The arrangement agreement also provides for a termination fee of CAD 7.5 million payable by Newstrike to HEXO if the transaction is terminated in certain specified circumstances.

The transaction is subject to approval by at least 66 2/3% of the votes cast by the shareholders of Newstrike and a simple majority of the votes cast by disinterested shareholders of Newstrike, present at a special meeting of Newstrike shareholders. As of May 17, 2019 the transaction has been approved by approximately 97.1% of the votes cast by all of the disinterested Newstrike shareholders eligible to vote at the Meeting. In addition to Newstrike shareholder approvals, the transaction is subject to the receipt of certain regulatory court and stock exchange approvals including final approval by the TSX Venture Exchange and the satisfaction of other conditions customary in transactions of this nature. The transaction is subject to resignation of Board of Directors of Newstrike. To the extent any member of the Board of Directors of any subsidiary of Newstrike is requested to not resign by HEXO in order to satisfy requirements under the Cannabis Act or Cannabis Regulations and the retention of the Newstrike Licences, such board member will remain on the board of such subsidiary. Newstrike's Board of Directors has unanimously determined, after receiving the unanimous recommendation of a special committee formed for purposes of the transaction, and financial and legal advice, that the transaction is in the best interests of Newstrike and its security holders, and the Board of Directors unanimously recommends that Newstrike's shareholders vote in favor of the transaction. The transaction has been unanimously approved by the Board of Directors of HEXO as well. HEXO has entered into irrevocable hard voting support agreements with each of Newstrike's directors and officers, along with certain other shareholders of Newstrike, representing in aggregate approximately 25% of Newstrike's issued and outstanding common shares. As of April 24, 2019, HEXO increased lock-up agreements to 38.3% of Newstrike's issued and outstanding common shares. As of May 9, 2019, the transaction has received regulatory approval from the Canadian Competition Bureau by way of a no-action letter under the Competition Act (Canada). As of May 22, 2019, Newstrike has obtained a final court order from the Ontario Superior Court of Justice approving the transaction. The transaction is expected to close by May 24, 2019. HEXO Corp. was represented in-house by Roch Vaillancourt and Joelle Maurais in the transaction.

RBC Capital Markets Inc. acted as fairness opinion advisor to Board of Directors of Newstrike and exclusive financial advisor to Newstrike. Steve Bennett, Omar Soliman, Precia Darshan, Debbie Wang, Lindsay Gwyer, Eryn Fanjoy, Michael Kilby, Khalfan Khalfan, Allyson Marta, Alexandra Peng, Ryan Sheahan, D'Arcy Nordick and Stewart Sutcliffe of Stikeman Elliott LLP acted as legal advisors to Newstrike. Doug Marshall and Kai Sheffield of Osler, Hoskin & Harcourt LLP acted as legal advisors to special committee of the Board of Directors of Newstrike. Amar Leclair-Ghosh, Eric Reither, Peter Wiazowski, Victoria Riley, Sam Zadeh, Jaray Zhao, Rujuta Patel, Stephen Nattrass, Barry Segal, Carl Deeprose, Sara Zborovski, Lisa Cabel, Nicole Buchanan, Janet Bobechko, Andre Shyman-ski, Jung-Kay Chiu, Michael Lieberman, Samantha Sarkozi, Alan Merskey and Geoff Mens of Norton Rose Fulbright Canada LLP acted as legal advisors to HEXO. TSX Trust Company acted as the transfer agent and registrar to Newstrike and HEXO. MNP LLP acted as the auditor to HEXO, while KPMG LLP acted as the auditor to Newstrike. Vaughn MacLellan and Sydney Kert of DLA Piper (Canada) LLP acted as legal advisor for Hexo in the transaction.

HEXO Corp. (TSX:HEXO) completed the acquisition of Newstrike Brands Ltd. (TSXV:HIP) on May 24, 2019. The Newstrike Shares will be delisted from the TSX Venture Exchange as of the close of trading on or about May 28, 2019.