HEXO Corp. (TSX:HEXO) entered into a definitive agreement to acquire Zenabis Global Inc. (TSX:ZENA) for approximately CAD 150 million on February 15, 2021. Under the terms of the arrangement agreement, Zenabis shareholders will receive 0.01772 of a HEXO common share in exchange for each Zenabis common share held. Warrants and incentive securities of Zenabis will be adjusted in accordance with their terms to ultimately become exercisable to receive common shares of HEXO based on the share exchange ratio. Post-acquisition, HEXO Shareholders will hold 88.4% and Zenabis Global will hold 11.6% stake in the combine company. The Arrangement Agreement also provides for a termination fee of CAD 6 million payable by Zenabis to HEXO if the transaction is terminated in certain specified circumstances. Zenabis team will join HEXO. One of the current Directors of Zenabis, selected by HEXO, will be appointed to HEXO's Board of Directors within 90 days of closing of the transaction, to increase the size of its Board of Directors by one Director.

The transaction will require approval by at least 66 2/3% of the votes cast by the shareholders of Zenabis. In addition, the transaction is subject to HEXO's shareholder approval, listing of the HEXO Shares, the receipt of certain regulatory, court and stock exchange approvals and all third-party consents shall have been obtained and the satisfaction of customary conditions precedent in transactions of this nature as well as the satisfaction of the following additional conditions precedent the termination and unconditional release of the guarantee provided by Zenabis in favor of Bank of Montreal in connection with the disposition of Bevo Farms Ltd. and its subsidiaries announced by Zenabis on January 4, 2021; the completion of the Bevo sale transaction; and certain other specified conditions precedent set out in the agreement. The transaction has been unanimously approved by the Board of Directors of each of HEXO and Zenabis (in the case of Zenabis' Board of Directors, after receiving the unanimous recommendation of a special committee formed for purposes of the transaction), and Zenabis' Board of Directors unanimously recommends that its shareholders vote in favor of the transaction, special meeting of shareholders to be held on May 13, 2021. As of April 1, 2021, antitrust approvals have been obtained. As of April 7, British Columbia Supreme Court has granted interim order for the transaction. As of May 13, 2021, the shareholders of Zenabis approved the transaction. As of May 18, 2021, Zenabis obtained a final court order from the Supreme Court of British Columbia approving the transaction. Closing of the arrangement is expected to occur on or about June 1, 2021, subject to the satisfaction or waiver of all applicable conditions precedent. The transaction is expected to be accretive for HEXO's shareholders.

Echelon Wealth Partners Inc. acted as fairness opinion provider to the Board of Directors of Zenabis. Echelon Capital Markets (a member of Echelon Wealth Partners Inc.) acted as financial advisor. Michael Urbani of Stikeman Elliott LLP acted as legal advisor to Zenabis and to the special committee of the Board of Directors of Zenabis. Alliance Global Partners acted as financial advisor, and Amar Leclair-Ghosh and Elliot Shapiro of Norton Rose Fulbright Canada LLP acted as legal advisor to HEXO. Computershare Investor Services Inc. acted as transfer agent, KPMG LLP acted as accountant, and Kingsdale Advisors acted as information agent to Zenabis Global. Shona C. Smith, Thomas M. Rose, Shona C. Smith of Troutman Pepper Hamilton Sanders LLP acted as legal advisor to Zenabis Global.

HEXO Corp. (TSX:HEXO) completed the acquisition of Zenabis Global Inc. (TSX:ZENA) on June 1, 2021. Zenabis Shares will be de-listed from the Toronto Stock Exchange as of the close of trading on or about June 2, 2021.