Canadian pot producer Tilray Brands Inc. on Monday said it agreed to buy peer Hexo Corp. for $56 million in an all-stock deal — after years of losses, steep competition and stalled federal reform in the U.S. have weighed on the industry’s growth prospects. With weed prices falling in Canada, Hexo’s
HEXO,
+30.16%
wrangling with its own finances, a big quarterly loss from Tilray and other industry acquisitions that haven’t panned out, analysts asked management: “Why now?”
“The Canadian market has to consolidate,” Tilray
TLRY,
+5.38%
Chief Executive Irwin Simon said during the company’s third-quarter earnings call on Monday. He said that Canada’s cannabis industry had more than 1,000 licensed producers. Simon also said that a growth facility run by Redecan, one such producer that Hexo bought in 2021, would be harnessed to lower Tilray’s production costs. While more producers give customers more options, the lower prices have made it harder for a money-losing industry, still dealing with the fallout of years of growing too much weed, to turn a profit. Market share has been hard to hold, and many of Canada’s highest-profile U.S.-traded companies have closed facilities and laid off staff over recent years. Simon also blamed heavy excise taxes for creating a more difficult financial backdrop. “No question, the Canadian government has been the most profitable cannabis business in our industry,” Simon said. The deal with Hexo, expected to close in June, comes after Tilray formed a strategic alliance with Hexo and bought up some of Hexo’s debt last year. That move was intended to help Hexo patch up its balance sheet after struggling with repayments. Under the terms of the deal, Tilray would issue 0.4352 of its common stock for each outstanding Hexo share. BNN Blo …