US-based Compass Diversified Holdings (CODI) has entered into a definitive agreement to sell its hemp food manufacturing company Manitoba Harvest to Tilray for an aggregate sales price up to C$419m ($316m).

Tilray is engaged in cannabis and cannabinoids research, cultivation, production and distribution. It currently serves various patients and consumers in twelve countries spanning five continents.

Manitoba Harvest is claimed to be the world’s largest vertically-integrated hemp food manufacturer. It is situated near its supply base in Canada.

The company’s 100% all-natural product lineup includes hemp hearts, hemp protein powder and hemp snacks. Its products are sold in about 16,000 retail locations across the US and Canada.

“We are proud to have partnered with the company to raise awareness of Hemp as a superfood, growing the customer base across North America.”

CODI intends to reduce debts and strengthen its balance sheet with the divestiture.

CODI CEO Elias Sabo said: “We acquired a majority interest in Manitoba Harvest over three years ago and are proud to have partnered with the company to raise awareness of Hemp as a superfood, growing the customer base across North America, more than doubling household penetration in the US and driving category expansion.”

As per the terms of the agreement, shareholders of Manitoba Harvest, including CODI, will receive up to C$419m ($316m), of which C$277.5m ($209m) is payable at closing, comprised of C$150m ($113m) in cash and C$127.5m ($96.3m) in Tilray Shares.

Six months after closing, Manitoba Harvest shareholders, including CODI, will receive C$92.5m ($69m), comprised of C$50m ($37m) in cash and C$42.5m ($32m) in Tilray Shares.

Additionally, Manitoba Harvest and CODI shareholders will receive an additional C$49m ($37m) in Tilray Shares after certain performance milestones have been achieved by Manitoba Harvest this year.

Competition of the deal is subject to customary terms and conditions, as well as court approval.

Manitoba Harvest CEO Bill Chiasson said: “With CODI’s support, guidance and patient investment style, Manitoba Harvest has solidified its position as the world’s largest vertically integrated hemp food brand.”