By Samuel Indyk
Investing.com – British American Tobacco (LON:BATS) (BAT) has announced it is acquiring at 19.9% equity investment in Canadian licenced cannabis producer OrganiGram Holdings Inc (TSX:OGI), with the investment valued at approximately £126mln.
The collaboration agreement will focus on research and product development activities of next generation adult cannabis products, with an initial focus on cannabidiol (CBD).
Through the agreement, BAT will gain access to R&D technologies, product innovation and cannabis expertise. The news further extends the company’s reach “beyond nicotine” following the launch of Vuse CBD Zone in Manchester earlier in 2021.
“Today's announcement underscores our commitment to accelerating our transformation and building A Better Tomorrow,” said Director Scientific Research of BAT Dr David O’Reilly. “This choice provides reduced risk alternatives to combustible cigarettes, as well as going beyond tobacco and nicotine into new and exciting areas of product innovation.”
Speaking about the deal, Organigram’s CEO Greg Engel said: “It is instrumental in advancing our commitment to offering consumers innovative cannabis products and to furthering our long-term international strategy.
“We have been extremely selective about aligning with a strategic partner and, in BAT, we've found a leading consumer goods business with innovative product platforms, an impressive dedication to research and development, deep consumer insights, regulatory expertise and a commitment to responsible stewardship and consumer safety.”
Deal terms
The investment is valued at £126mln and was priced at CAD 3.79 per Organigram share, which was based on the five-day weighted average of shares ending March 9th 2021. The price represents a discount to the closing price of CAD 3.94 on March 9th.
BAT will now become the largest shareholder in Organigram and has the ability to nominate two directors to the Organigram’s board of directors and have representation on its investment committee. At closing of the deal, BAT nominee Jeyan Heper was added to the board with one nominee expected to be added in the near term.