Tilray Brands Inc. /zigman2/quotes/209129655/composite TLRY +2.18% /zigman2/quotes/226578748/delayed CA:TLRY +2.76% said Thursday it would buy up to $211 million of Hexo Corp. /zigman2/quotes/206508254/composite HEXO -3.65% /zigman2/quotes/200008967/delayed CA:HEXO 0.00% senior secured convertible notes held by HT Investments MA LLC as part of a strategic alliance between the two cannabis companies. Tilray would have the right to convert the debt into stock at a price of 90 cents per Hexo share. The transaction will provide Tilray with a "significant equity ownership position" in Hexo, the company said. Hexo would pay Tilray about C$20 million in interest payments the first year, or about 4 cents a share in earnings. Tilray said it will also realize about C$50 million in efficiency savings within two years. Hexo said the deal will provide it with more favorable terms on the debt and will allow the company to strengthen its balance sheet and "accelerate its transformation into a cash flow positive business within the next four quarters." Shares of Hexo rose 27% in premarket trades, but remained well under $1 a share. Tilray dipped 0.2%.
An earlier version of this article reported a figure in Canadian dollars, not U.S. dollars. It has been corrected.