Canadian producer Hexo Corp. (TSX: HEXO) (NYSE: HEXO) is making its first foray into the American pot market by striking a deal to buy a 50,000-square-foot facility in northern Colorado.
On Friday, the Ottawa-based firm said its first facility in the United States will be bought through a wholly owned U.S. subsidiary.
The site will be “zoned for production of a full range of cannabinoids and offers multiple operational capabilities,” Hexo added.
Because cannabis is illegal in America at the federal level, major Canadian weed firms have been waiting patiently on the sidelines to enter the lucrative market stateside. After months of speculation, Washington D.C. lawmakers have said they’ll reveal a major cannabis bill in the coming weeks.
But Hexo appears to have found a loophole to legally jump into surging state-legal markets ahead of a extensive federal reform measures passing.
CEO Sebastian St. Louis said the facility enables his company to continue expanding its Truss joint venture with Molson Coors to create CBD-infused beverages.
In January, Hexo and Molson launched cannabidiol drinks in Colorado under their brand Verywell to test the products before seeking new state CBD markets to enter.
St. Louis said the Colorado facility provides Hexo the ability to begin production and create new non-beverage cannabis consumer-packaged-goods partnerships.
While Hexo didn’t reveal any financial details about the facility in Friday’s statement, the company issued a shelf prospectus on May 7 that describes its plans to buy and retrofit a Colorado production site.
In the filing, Hexo said it expects the facility would cost US$6 million to buy, with another US$16.5–49.5 million in upgrade costs.
The company notes that it established a new subsidiary, Keystone Isolation Technologies USA, with joint venture partner Chroma Global Technologies Inc. to support its U.S. expansion plans.
Not only will the new subsidiary give Hexo a unique way to enter Colorado’s CBD and cannabis markets, but the company says it’s also “aiming to enter select U.S. states … to the extent that such activities fully comply with applicable laws.”
On Friday, Hexo said it expects to close the facility deal in the fourth quarter, subject to a due diligence period as well as regulatory approvals.
In a separate statement, Hexo revealed Friday that it plans to raise up to $500 million through a freshly filed short-form base shelf prospectus.
Shares of Hexo rose 4 per cent Friday to $7.39 on the Toronto Stock Exchange.