British American Tobacco Amplifies Investment in Organigram

LOS ANGELES- British American Tobacco (BAT), a global tobacco company, has significantly increased its investment in Canadian cannabis producer Organigram Holdings. The latest investment of 124.6 million Canadian dollars ($92.5 million) marks a deepening partnership between the two companies, following BAT’s previous investments of CA$6.35 million in 2022 and an initial CA$220 million in 2021. This move elevates BAT’s voting common share ownership in Organigram to 30% and overall equity interest to 45%.

Organigram’s CEO Beena Goldenberg expressed enthusiasm about the development in a recent news release, highlighting the strategic nature of the partnership with BAT. “This investment strengthens our balance sheet and solidifies our position as a leading cannabis company,” Goldenberg said. She also emphasized the advantage of leveraging BAT’s global capabilities and scientific expertise to further Organigram’s growth.

The majority of the new capital injection, approximately CA$83.1 million, is earmarked for a strategic investment pool named Jupiter. This fund will focus on emerging cannabis opportunities, aligning with Organigram’s strategic priority for geographic expansion. The remainder of the investment is allocated for general corporate use.

The Jupiter fund represents a significant step in Organigram’s global expansion strategy. In the news release, Organigram noted the optimal market conditions for BAT’s aggressive investment approach, citing factors like emerging global cannabis legalization trends, the undervaluation of numerous cannabis companies, and the increasing need for strategic investors in the cannabis sector.

Goldenberg further stated that the strategic investment pool is poised to accelerate Organigram’s growth plans, enabling further geographic, technological, and product expansion. Organigram plans to establish an internal team dedicated to identifying future investment targets.

The investment process involves BAT subscribing for 38.7 million shares at CA$3.2203 per share, with the gross proceeds amounting to CA$124.6 million, to be completed in three tranches. This move is contingent upon receiving regulatory approvals and the approval of Organigram’s shareholders.

Organigram’s shares showed a robust response to the news, trading at CA$2.08 on Monday morning, marking a 30% increase from Friday’s close. The completion of the first tranche will grant BAT the right to appoint up to 30% of the Organigram board.

This strategic partnership between BAT and Organigram signifies a notable shift in the global cannabis industry. It reflects the increasing interest of established tobacco companies in the cannabis sector, recognizing the potential growth opportunities in a market that continues to evolve legally and commercially. This collaboration could set a precedent for future investments and partnerships between traditional tobacco companies and the burgeoning cannabis industry, potentially reshaping market dynamics and accelerating global cannabis industry growth.