One of the mainstays of Canada’s marijuana industry, HEXO (NYSE:HEXO) is making an incursion across that country’s southern border. The company announced Friday that, through a fully owned U.S. subsidiary, it has signed agreements to purchase a production facility in Colorado. This is HEXO’s first such property on American soil.
The company did not specify how much it is paying for the property. It also did not provide many details about the real estate but revealed that it is located in the northern part of the state and comprises roughly 50,000 square feet. It also said that, conveniently, it is zoned for the production of a range of cannabis products.
Also, HEXO quoted its CEO Sebastien St-Louis as saying:
The facility will provide HEXO with the necessary infrastructure to begin production and enable the Company to continue expanding our joint-venture with Molson Coors to create Truss [cannabidiol, or CBD]-infused beverages, while also creating the necessary capacity to support future, non-beverage [consumer packaged goods, or CPG] partnerships.
The deal is the latest in a series of U.S. asset purchases by Canadian weedies, which have usually taken the form of company acquisitions rather than property buys. Notable actions in this respect include Canopy Growth‘s conditional deal for Acreage Holdings and Cronos Group‘s 2019 purchase of California-based CBD products maker Lord Jones.
HEXO’s Colorado move highlights the importance the company is placing on those CPG tie-ups and could position it nicely in the marijuana-infused comestibles segment in particular…if this country ever gets around to marijuana decriminalization at the federal level, of course.
Investors approve of the deal, it seems. On Friday, HEXO closed nearly 4% higher, easily topping the 1.5% gain of the S&P 500 index.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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