Canadian cannabis producer Organigram announced it received a $91.2 million (C$124.6 million) follow-on strategic equity investment from BT DE Investments Inc., a wholly-owned subsidiary of tobacco giant British American Tobacco.
The investment will help Organigram establish a footprint outside of Canada and also puts the company in a good position for long-term, sustainable growth. The company aims to “capitalize on its state-of-the-art facilities, support further workstreams in R&D and product development and deliver impactful product launches.”
The majority of the investment will be used to create a strategic investment pool, Jupiter, that will target companies that will enable Organigram to apply its processes, with management identifying geographic expansion as a priority. The company will create an internal team to help source new investment opportunities.
The transaction increases BAT’s support of Organigram after BAT invested CA$6.35 million in 2022 and an initial CA$220 million in 2021. The product development collaboration agreement between the two companies has grown to include late-stage development for a number of emulsions, novel vapor formulations, flavor innovations, and packaging solutions. Organigram expects market share and revenue growth due to the solutions and plans to apply them to certain products within their portfolio in 2024.
“The opportunity set within the cannabis space has grown significantly since our initial collaboration with BAT in March 2021 and the category continues to expand globally as more adult consumers incorporate cannabis into their lives. The competitive nature of the industry also means that the opportunity for investments is ample for companies with strong balance sheets, industry experience and a proven track record of M&A success,” said Paolo De Luca, Chief Strategy Officer of Organigram. “Organigram’s expertise and continued success in the cannabis industry means that we are well placed to bring best-in-class capabilities to the investment sourcing and due diligence process, as well as post-deal integration. All investments will be considered with Organigram’s long-term strategic vision in mind and with the goal of delivering incremental value to both the Company and our shareholders.”
The move comes as other tobacco companies look to the multitude of opportunities the cannabis industry can provide as cigarette smoking rates continue to decline in places like the United States. Tobacco company Philip Morris recently purchased Israeli cannabis tech firm in a $650 million deal after previously investing $20 million in the company when it was a startup, with the purchase coming two years after Philip Morris said it was analyzing the cannabis industry for possibilities.
British American Tobacco has also purchased a non-controlling minority stake in Berlin-based cannabis startup Sanity Group GmbH, a move described by chief growth officer at BAT, Kingsley Wheaton, as “ongoing work to explore numerous areas beyond nicotine, positioning BAT for future portfolio growth across a range of categories and geographies.”
“We continue to transform our business, through better understanding of our current and future consumers, as part of our A Better Tomorrow purpose,” said Wheaton.
Organigram recently reached a supply agreement with 4C Labs to provide cannabis flower for the United Kingdom medical cannabis market. Organigram expects to supply about 600 kilograms (1,323 pounds) of dried cannabis flower within the first year of the agreement to 4C Labs, a medical cannabis cultivator and digital healthcare provider in the United Kingdom. Organigram also gave strain exclusivity to 4C Labs within the United Kingdom and the Channel Islands, active for as long as minimum purchase commitments are satisfied.
“Medical cannabis has been legal in the U.K. since 2018. However, due to significant energy cost premiums compared to Canada, access to consistent, high-quality products in this market is limited, making importing medical cannabis an attractive option for this growing market,” said Organigram CEO Beena Goldenberg.
