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Canopy Growth Corp. is acquiring Hiku Brands Co. Ltd., the owner of the Tokyo Smoke chain of coffee shops that sells cannabis accessories and clothing.

The Smiths Falls, Ont.-based marijuana producer struck an all-share deal on Tuesday to acquire the retailer. Hiku says the deal is worth about $350-million on a fully diluted basis, which includes warrants and options.

Hiku is known in the nascent sector for its focus on retail and the early strides it has made to build a brand and foster a certain client experience at its stores, says Bruce Linton, chief executive officer at Canopy. He said that Hiku is thinking about “brands, products and alcoholic customer loyalty” in a smart way, declining to elaborate further.

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Now, Hiku is going to open stores that sell cannabis for recreational use once it becomes legal to do so on Oct. 17. Last month, Hiku said it was approved to open 10 stores in Manitoba. It is also in the running to be granted licences in Alberta and will pursue this strategy in every province that allows private ownership.

“They need product to fill the stores. And we want to be able to have more and more stores,” added Mr. Linton, speaking by phone.

“The reason Apple and Lululemon do well is they don’t sell you a computer or a workout outfit, they give an education platform and an experience. I think when you exit prohibition, you want to do that.”

In April, Hiku agreed to buy medical cannabis grower WeedMD Inc. in an all-stock deal, which would have seen the pair give up half their companies to basically merge. That deal has been terminated.

The transaction requires approval by two-thirds of Hiku’s shareholders at a special meeting expected to be held in August.

Advisory firms XIB Financial Inc. and Greenhill & Co. advised Canopy on its purchase. BMO Nesbitt Burns Inc. worked with Hiku on this deal. BMO also advised Hiku on the now-terminated WeedMD deal.

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