Metals Update 21/07/2021

48North mails circular for Aug. 17 special meeting

48North Cannabis Corp. has filed and mailed its management information circular, and related meeting and proxy materials for the special meeting of the shareholders of the company to be held virtually on Tuesday, Aug. 17, 2021, at 10 a.m. (Toronto time). The purpose of the meeting is to consider and, if thought advisable, to pass a special resolution, with or without variation, approving the previously announced transaction pursuant to which Hexo Corp. will acquire all of the issued and outstanding common shares of the company by way of a court-approved plan of arrangement under the Canada Business Corporations Act. The information circular contains a detailed description of the arrangement and other information relating to the company and Hexo.

On July 14, 2021, the company obtained an interim order of the Ontario Superior Court of Justice (Commercial List), which, among other things, authorizes the calling and holding of the meeting, stipulates the dissent rights granted to the company shareholders and specifies certain other matters relating to the conduct of the meeting. The granting of the interim order is a condition precedent to the completion of the arrangement in addition to a final order of the court concluding as to the fairness of the arrangement at a hearing to be held following the meeting in the event the company shareholders approve the arrangement. In accordance with the interim order, the meeting materials have been mailed to the company shareholders, and are also available on the company’s website and under the company’s profile on SEDAR.

The board of directors of the company has determined that the arrangement is in the best interests of the company and fair to the company shareholders, and unanimously recommends that company shareholders vote in favour of the arrangement resolution at the meeting.

Subject to receipt of all regulatory, court, shareholder and stock exchange approvals, the satisfaction of customary conditions precedent in transactions of this nature, and the satisfaction of certain other specified conditions precedent set out in the arrangement agreement dated May 17, 2021, between the company and Hexo, the arrangement is expected to be completed at the end of August, 2021, shortly following the meeting and the granting of the final order.

Voting and participation at the meeting


The company remains mindful of the well-being of the company shareholders and other stakeholders of the company amid the continuing concerns regarding the coronavirus (COVID-19) outbreak, and, accordingly, the meeting will be held exclusively as a virtual (by electronic means) shareholder meeting. Company shareholders will not be able to attend the meeting in person. The meeting will be held via live audio webcast available on-line using the Lumi meeting platform on Tuesday, Aug. 17, 2021, at 10 a.m. (Toronto time). A detailed summary of the information company shareholders will need to attend the meeting on-line is provided in the information circular.


At the meeting, company shareholders will be asked to consider and, if thought advisable, approve, with or without variation, the arrangement resolution. To become effective, the arrangement resolution must be approved at the meeting by the affirmative vote of: (i) at least 66-2/3 per cent of the votes cast by company shareholders virtually present or represented by proxy at the meeting and entitled to vote thereat; and (ii) a simple majority of the votes cast by company shareholders virtually present or represented by proxy at the meeting and entitled to vote thereat, excluding the votes of persons whose votes must be excluded in accordance with Multilateral Instrument 61-101 — Protection of Minority Security Holders in Special Transactions (as described in greater detail in the information circular).

Your vote is important regardless of the number of common shares you own. All company shareholders are encouraged to deposit their proxies before 5 p.m. (Toronto time) on Friday, Aug. 13, 2021.

Benefits to company shareholders

In recommending that company shareholders vote in favour of the arrangement, the company board considered a number of factors, including, among others, the following.

Ownership in a larger, stronger company focused on cannabis production

On June 1, 2021, Hexo completed its previously announced plan of arrangement transaction with Zenabis Global Inc., following which the combined organization is one of the top three Canadian licensed producers, as such term is defined in the Cannabis Act (Canada) in terms of combined Canadian recreational cannabis sales (based on the most recently filed quarterly financial information of the top five licensed producers in Canada). Assuming completion of Hexo’s proposed transaction (as announced by Hexo on May 28, 2021), to acquire RedeCan, presently Canada’s largest privately owned licensed producer, the resulting issuer would hold the No. 1 market share in the Canadian recreational cannabis market and the No. 1 position in four of Canada’s largest markets: Alberta, British Columbia, Quebec and Ontario. Following completion of the arrangement, company shareholders will have an ownership interest in the combined organization, which is expected to have an enhanced capital markets profile, and a robust financial profile with a strong balance sheet and financial position in terms of debt, low depreciable capital base and working capital.

Enhancing shareholder value

In the company board’s view, the company and company shareholders should ultimately benefit from what it believes to be a lower cost of capital at Hexo than at the company, and, following completion of the arrangement, the addition of the company’s innovative product offerings (including topicals, bath and intimacy products) to Hexo’s existing product offerings would be expected to provide a strong base for potential future consumer packaged goods partnerships in the United States, Canada and internationally, further enhancing shareholder value.

Premium to company shareholders

The exchange ratio (being 0.02366 of a common share of Hexo in exchange for each common share) implies a premium per company share of approximately 20 per cent based on the 10-day volume-weighted average price of the common shares on the TSX Venture Exchange and the Hexo shares on the Toronto Stock Exchange as of the close of markets on May 14, 2021, and then takes into account an adjustment for 50 per cent of the $5-million bridge loan advanced by Hexo to the company in June, 2021 (as described in greater detail in the information circular).

Shareholders will participate in the business of the resulting issuer

Following the completion of the arrangement, 48North shareholders will hold shares of the combined organization and will participate in any future increases in value of the shares.

The foregoing summary is not intended to be exhaustive, and is qualified in its entirety by the detailed discussion and description thereof in the information circular.

Shareholder questions and assistance

If you have questions regarding the arrangement or require assistance with voting or delivery of your form of proxy, please contact the company’s proxy solicitation agent, Gryphon Advisors Inc., by telephone at 1-833-461-3643 (toll-free in North America) or 416-902-5565 (collect call outside North America), or by e-mail at

Company shareholders are encouraged to carefully read the meeting materials, which are available on the company’s website and under the company’s profile on SEDAR. The meeting materials have also been mailed to the company shareholders.