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Hexo to buy Zenabis in latest tie-up in cannabis sector that's seeing a burst of M&A activity – MarketWatch

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Canadian cannabis company Hexo Corp. is acquiring Zenabis Global Inc. in an all-stock deal valued at about C$235 million ($185.2 million), in the latest tie-up in a sector that has been experiencing a burst of M&A activity.

Under the terms of the deal, Ottawa-based Hexo will pay the shareholders of Vancouver-based Zenabis 0.01772 of a Hexo share
HEXO,
+22.58%

HEXO,
+22.16%

for each Zenabis share
ZBISF,
+18.25%

ZENA,
+16.13%

owned, equal to a premium of about 19% based on the 20-day volume-weighted average price of Zenabis common shares and HEXO common shares on the Toronto Stock Exchange, as of February 12, 2021.

The deal has been approved by the boards of both companies and will be put to Zenabis shareholders at a special meeting. Zenabis will face a C$6 million termination fee if the deal is called off.

Once the deal has closed, Hexo shareholders will own 87.43% of the combined company and Zenabis shareholders will hold the remaining 12.57%.

Read: Cannabis stocks nosedive as rally driven by hopes for U.S. legal reforms comes to a screeching halt

The new entity will be a top three licensed producer in Canada’s legal recreational market by sales. It will also offer Hexo a foothold in the European medical cannabis market via Zenabis’ local partner in Malta, with an established facility supplying pharmaceutical products to the European Union market.

The companies are expecting the deal to generate annual synergies of about C$20 million within one year of closing. Hexo will have an additional two indoor grow facilities of about 635,000 square feet, and access to a 2.1 million sq. ft. greenhouse facility, for a total of about 2.735 million sq. ft.

Read now: Aurora Cannabis stock slides as analysts weigh in on weak quarterly earnings and one downgrades to sell

“We are proceeding with this transaction because we believe it should be accretive for our shareholders, and it also positions HEXO for accelerated domestic and international growth while supporting near-term requirements for additional licensed capacity,” Hexo Chief Executive and co-Founder Sebastien St-Louis said in a statement.

Jefferies analyst Owen Bennett said that while the deal shouldn’t surprise, given recent moves by Hexo to consolidate its stock and looks to be accretive, “we do wonder if this has been overly driven by short termism, and from a strategic perspective it does not really get us excited.”

In the Canadian market, Hexo is not acquiring any brands of value, and Zenabis’s main brands are value/discount, as are Hexo’s. The addition of a European presence while broadly positive, is really just a joint venture, Bennett wrote in a note.

“We think Hexo would have been much better placed looking to do something in the US. After all, it is US optionality which will be critical to maintaining current Canadian sector multiples, not Canada and Europe,” he wrote.

Jefferies rates Hexo at underperform.

The deal comes after two recent transactions that made a splash., the Feb. 4 news that GW Pharmaceuticals Ltd.
GWPH,
-0.20%
,
the first company to win U.S. Food and Drug Administration approval for a cannabis-based drug, is being taken over by Jazz Pharmaceuticals PLC.
JAZZ,
-0.61%

in a $7 billion deal. That came after the December announcement of a $3.9 billion reverse merger deal between Tilray Inc.
TLRY,
+19.41%

and Aphria Inc.
APHA,
+28.28%

APHA,
+27.61%
,
to form the world’s biggest cannabis company measured by revenue.

Read now: To profit from planned merger of Tilray and Aphria, buy Aphria, says this analyst

It also comes after a broad-based rally in the cannabis sector spurred on by the new U.S. administration with President Joe Biden viewed as in favor of reforming the U.S.’s strict cannabis laws, which continue to classify the plant as a Schedule 1 drug, alongside heroin.

That classification has hampered the development of the sector, which is confined to those states that have legalized cannabis for medical or recreational use and kept companies mostly locked out of the federally insured banking system and capital markets. A change in the law is expected to free up capital and bring many new investors to the space.

See: New York is finally expected to legalize cannabis in 2021 as Gov. Cuomo goes all in

Senate Majority Leader Chuck Schumer has pledged to make reform a key part of the current Congress. While most Canadian companies are unlikely to profit from U.S. legalization immediately, it will greatly expand the legal market and the stocks have been swept up in the euphoria.

Read now: Cannabis stocks rally after Chuck Schumer leads drive for reforms that may end federal prohibition

Shares of both companies were higher on the news. Hexo was up 14.6%, while Zenabis was up about 10%.

The Cannabis ETF
THCX,
+5.70%

was up 5% and the S&P 500
SPX,
-0.06%

was flat.

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How the pandemic could create the flexible workplaces parents need – CBC.ca

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For Tendai Dongo, the stress and anxiety was just too much at times. A project manager at a digital education company based in Calgary, she has spent much of the pandemic balancing her job with the needs of her young daughters.

With her husband’s insurance job requiring him to be out of the house frequently, the majority of the child-care responsibilities fell to her.

Everything came to a head in December. 

“I felt that I had to quit,” said Tendai Dongo, who works at Xpan Interactive Ltd. “I had to choose … a full-time career or my mental health.”

The mother of two girls aged five and eight years old told her employer that working full-time from home while parenting was causing her a lot of stress and anxiety.

“I was just going to throw in the towel. I did not have any other opportunity out there waiting for me,” said Dongo. 

But the chaos of watching employees juggle school closures, virtual learning, quarantines and their jobs could lead to more empathetic workplaces. Some companies, including Dongo’s, are thinking creatively about how to build more flexible work arrangements for their employees.

A year into the pandemic, parents are feeling the effects of being tugged in all directions — particularly women. 

An online survey of 1,001 working Canadians conducted between Feb. 9 and 15 by ADP Canada and Leger found half of working mothers (50 per cent) reported experiencing high stress levels due to balancing child-care obligations and work, compared to 40 per cent of working fathers.

Data released by Statistics Canada also shows pandemic job losses are disproportionately affecting women. In January, for example, the employment decline for woman was more than double that of men, with 73,000 fewer women working that month compared to 33,500 fewer men.

The numbers also showed the decline in employment was pronounced among mothers whose youngest child was between the ages of six and 12. Their employment rate fell 2.9 percentage points, compared to a drop of 0.9 percentage points for all working adults.

‘It’s really, really impossibly hard’

For Danielle Ellenor, working a full-time job as an account associate for a printing company that offered little flexibility while she was home with her young children was too overwhelming. 

“It takes a huge toll on your mental health, on your kid’s mental health,” said Ellenor, an Ottawa mother of two girls aged six and seven. “It’s really, really impossibly hard.”

Her partner has been working from home too, but his management job in software sales has him in virtual meetings most of the day. 

Ottawa mother of two Danielle Ellenor quit her job in December for a more flexible career. (Mathieu Thériault/CBC)

In December, knowing that more school closures were coming, Ellenor left the company she had been with for almost 10 years to focus on her kids and transition to a more flexible career in real estate. 

“It’s a gamble that I decided to make,” said Ellenor.

There’s concern that many other women may drop out of the workforce permanently.

‘We could lose an entire class of future leaders’

McKinsey & Company conducted an online survey of more than 40,000 workers across Canada and the United States between June and August 2020.

The survey found that one in four women were contemplating downshifting their careers or leaving the workforce.

“We would lose an entire class of future leaders and in some cases existing leaders, because it spans all the way to the highest levels of organizations,” said Alexis Krivkovich, a senior partner at the global consulting firm.

But amidst the crisis comes opportunity, she said. Some companies are finding creative ways to retain their employees, such as flexible time-off schedules, re-imagining performance management and thinking differently about working hours.

“We need more of that creative thinking now to make sure that the one in four women who are saying, ‘I’m not sure I can make it through this moment’ come out the other side,” Krivkovich said.

Letting employees chart their own paths

Vancouver-based software company Bananatag has embraced flexibility during the pandemic by coming up with a “choose your own adventure” schedule for its 130 employees.

“We are quite flexible on location, preferred work style, preferred hours,” said Agata Zasada, vice-president of people and culture at Bananatag. 

Agata Zasada, vice-president of people and culture at Vancouver-based Bananatag, says the company’s ‘choose your own adventure’ schedule has kept all of their staff employed over the course of the pandemic (Dillon Hodgin/CBC)

With about 50 per cent of their workforce made up of women and many parents on staff, the company wanted to remove a level of uncertainty for all of its employees.

“We haven’t lost anyone through the pandemic due to not being able to be flexible enough,” said Zasada.

Post-pandemic Bananatag will continue to let employees choose their own schedules. The company also plans to become even more flexible by entertaining the idea of job sharing and becoming more project-based.

Tendai Dongo of Airdrie, Alta., scaled back to part-time work because she was so overwhelmed by the demands of her job and her children during the coronavirus pandemic. 1:04

Carly Holm, founder and CEO of Holm & Company, a human resources company, is hopeful that some good will come out of this challenging year.

“We’ve proven that we can be flexible and still be successful and be productive and that nine-to-five is irrelevant,” said Holm. “It is completely arbitrary and doesn’t work for a lot of people.”

Holm’s firm offers HR services for small to medium-sized businesses. She says results of her client’s employee engagement surveys show that employees are happier when given flexibility, and that companies offering it are performing better.

“The companies that encourage that and have kind of that flexible, remote work, they’re going to be the ones that are going to retain the people, retain women,” said Holm. 

COVID … has catapulted institutional mindsets around flexible work into the future– Jennifer Hargreaves, founder of Tellent

When Dongo, the project manager in Calgary, told her boss she couldn’t mentally handle being a full-time employee and a mother right now, her workplace took action.

Instead of letting her quit, Xpan Interactive came up with a solution that she says is working well. 

The company dropped her workload from eight clients to one and reduced her to part-time flexible hours. She now works when she wants and when she can.  

Dongo’s salary has also been reduced. She admits she and her husband have had to start dipping into their savings, but she appreciates that her company came up with a solution that allows her to stay in the workforce. 

“I still have that sense of purpose that I am still continuing in my career,” said Dongo. 

Creating your own flexibility

Since 2016, Jennifer Hargreaves has been an advocate for more flexibility and has successfully placed women in flexible higher paying jobs through her virtual networking platform. 

“One of the benefits … of COVID is that it has catapulted institutional mindsets around flexible work into the future,” said Hargreaves, founder of Tellent, a network that provides women with access to flexible job opportunities.

Jennifer Hargreaves, founder of networking platform Tellent, says the need for flexible work among her members has skyrocketed. (Submitted by Jennifer Hargreaves)

Among her 10,000 members, she says the need for flexible work has skyrocketed.

The first step in finding that flexible job, according to Hargreaves, starts with your current employer. She encourages women to approach their companies, as Dongo did, to see if they can draw up new arrangements.

“There’s no better time like right now to negotiate what you want because everything’s up in the air,” Hargreaves said. “Employers are starting from scratch and they’re trying to figure out what this looks like as well.”

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New COVID-19 cases in Ontario spike above 1600 as stay-at-home order lifts in Toronto, Peel Region – CTV Toronto

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TORONTO —
COVID-19 infections in Ontario have spiked to levels unseen since early February but the province says Monday’s case count is higher than expected due to a “data catch-up process” related to its case and contact management system.

The province said it recorded 1,631 new COVID-19 infections in the last 24 hours. The last time Ontario saw case numbers that high was on Feb. 5 when 1,670 infections were logged.

A spokesperson for the Ministry of Health said in an email that they weren’t aware of the data issue prior to the release of Monday’s report.

“Apologies for not raising this sooner,” the spokesperson said. “As you know, we try to get this info to you in advance of posting the numbers but weren’t aware of the issue until just now.”

This brings Ontario’s lab-confirmed COVID-19 case total to 309,927, including 291,834 recoveries and 7,077 deaths.

Health officials said that 10 of those deaths were recorded in the previous day.

As well, with only 38,063 tests processed in the last 24-hour period, Ontario’s COVID-19 positivity rate stands at 3.4 per cent, the province said.

Monday’s report shows that Ontario’s seven-day average for number of COVID-19 cases reported is 1,155. A week ago today, that number was 1,098. 

Where are the new COVID-19 cases?

Most of the new cases reported Monday were found in Toronto, Peel Region and York Region.

According to the province, Toronto logged 570 new infections, while Peel and York regions recorded 322 and 119 cases, respectively.

As of today, Toronto and Peel Region have returned to the province’s colour-coded reopening framework and are currently operating in the grey-lockdown level.

This means that non-essential businesses like retail stores can once again open their doors, with strict capacity limits in place.

Gyms, personal care services and indoor and outdoor restaurant dining remain off limits within the grey zone.

York Region entered the framework on Feb. 22 and is currently operating in the red-control zone, which is one step down from the grey-lockdown level.

There are currently 626 patients in hospital with COVID-19, though that number is typically lower on Mondays due to a delay in reporting. Of those patients, 282 are in an intensive care unit and 184 are breathing on a ventilator.  

Number of COVID-19 variant infections climbs

The province says that since yesterday, 68 more infections of a COVID-19 variant of concern have been confirmed in Ontario.

Of those, 51 are of the strain known as B.1.1.7 (UK variant), pushing the total number for that variant to 879.

Another eight cases of B.1.351 (South African variant) were also confirmed, which brings the case count for that variant to 39.

Nine more infections of P.1 (Brazilian variant) were added bringing the total for that variant to 17. 

Update on COVID-19 vaccinations

Since vaccinations began in December, the province says it has administered nearly 1,000,000 doses of a COVID-19 vaccine across Ontario.

Of the 912,486 total doses administered, 273,676 people have received both their first and second doses and are considered to be fully vaccinated against the virus.

At least 21,882 shots went into arms in the last 24 hours, the province said. 

Backstory:

The numbers used in this story are found in the Ontario Ministry of Health’s COVID-19 Daily Epidemiologic Summary. The number of cases for any city or region may differ slightly from what is reported by the province, because local units report figures at different times.

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Ontario reports 1,631 new coronavirus cases; 10 more deaths – CP24 Toronto's Breaking News

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Ontario reported another 1,631 cases of COVID-19 on Monday along with 10 deaths the highest daily tally of cases in more than a month.

It’s the highest count of cases reported in Ontario since Feb. 5, when there were 1,670 cases reported.

During that time, most schools were still closed and the entire province was under a stay-at-home order that formally expired in Toronto, Peel and North Bay at midnight last night.

The province reported 1,299 new cases on Sunday, 990 more cases on Saturday and 1,250 new cases on Friday.

Across the GTA, Toronto reported 568 cases, the highest daily total that city has seen since Feb. 5, while Peel Region reported 322 new cases, the highest daily total the region has disclosed since Feb. 2.

York Region reported 119 new cases on Monday, while Durham Region reported 68 new cases, Halton reported 51 and Hamilton reported 22.

Provincial labs processed 38,063 tests in the past 24 hours, generating a positivity rate of at least 3.4 per cent.

None of the ten deaths reported on Monday occurred in the long-term care system.

There are now 11,016 active cases of novel coronavirus infection across the province, up from 10,570 one week ago.

A total of 7,077 people are known to have died from COVID-19, while 291,800 people have made a full recovery from illness.

The seven-day rolling average of daily cases rose to 1,155 on Monday, up from 1,069 on Sunday.

Meanwhile, hospitalizations stayed relatively flat when compared to Sunday.

The Ministry of Health says there were 626 people in hospital on Monday, up 20 from Sunday.

Of those, 282 were in intensive care and 184 were breathing with the help of a ventilator.

Public Health Ontario confirmed an additional 63 cases of coronavirus variants of concern in the past 24 hours, bringing the total confirmed through whole genomic sequencing in the province to 935.

There are also several thousand additional positive specimens that screened positive for a variant of concern but were awaiting full confirmation, local public health units said.

Public Health Ontario said that between 35 and 40 per cent of all positive samples were screening positive for a variant of concern late last week.

The province said it administered another 21,000 doses of approved coronavirus vaccines on Sunday, bringing the total number of shots administered to 912,486.

More than 273,000 people have now completed the full two-dose inoculation.

The numbers used in this story are found in the Ontario Ministry of Health’s COVID-19 Daily Epidemiologic Summary. The number of cases for any city or region may differ slightly from what is reported by the province, because local units report figures at different times.

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