HEXO Corp., Molson Coors Move Forward with Cannabis JV

HEXO Corp. (TSX:HEXO), one of the Canadian marijuana stocks, has formalized its previously-announced joint venture with Molson Coors Canada to develop non-alcoholic, cannabis-infused beverages

SmallCapPower | October 5, 2018: HEXO Corp. (TSX:HEXO) late Thursday said it has closed the transaction announced on August 1, 2018, to form a joint venture with Molson Coors Canada (MCC), the Canadian business unit of Molson Coors Brewing Company (NYSE:TAP, TSX:TPX) for development of non-alcoholic, cannabis-infused beverages for the Canadian market post legalization. The joint venture, which is now known as Truss, is structured as a standalone company with its own board of directors and independent management team. HEXO, one of the Canadian marijuana stocks, has 42.5% stake in the joint venture while Molson Coors Canada has controlling interest of 57.5%.

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Truss will be headed by former Molson Coors executive, Brett Vye. CEO Brett Vye will report to Truss’ board of directors comprising two members appointed by HEXO and three members appointed by MCC. The new CEO has over a decade of experience in brand building and execution of long-term growth strategies. Brett Vye served as the Chief Commercial and Strategy Officer from 2015 to 2018 for the fast-growing international division of Molson Coors. Formerly, he served as Chief Commercial Officer of Global License and as Managing Director of IOP Sales at Molson Coors. Additionally, Vye has worked in several commercial roles internationally for Colgate Palmolive/Hills Pet Nutrition.

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Initially, the five-member board of directors for Truss will comprise Frederic Landtmeters, President and CEO of MCC; Paul Holden, VP of Legal and Industry Affairs of MCC; Scott Cooper, VP, Global Innovation of Molson Coors (Chairman of the Truss Board); Sebastien St-Louis, CEO and co-founder of HEXO, and Ed Chaplin, CFO of HEXO.

Truss CEO Brett Vye remarked, “With the backing of two partners with deep Canadian roots, proven success, and market-leading experience in the respective beverage and cannabis industries in Canada, Truss will hit the ground running. When consumable cannabis is legalized in Canada, Truss will be ready to make its mark as a responsible leader in providing high-quality beverages for the Canadian consumer.”

As per the deal, HEXO has issued 11,500,000 warrants to MCC, each of which is exercisable to purchase one common share of HEXO at an exercise price of C$6.00 for a period of three years.

HEXO currently trades at a market capitalization of C$1.64 billion with a price-to-book multiple of 5.21x. HEXO caters to the Canadian cannabis space through low cost and easy-to-use products. HEXO will serve the adult-use market under the HEXO brand and continues to service medical cannabis clients through the well-known Hydropothecary brand.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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