British American Tobacco is once again increasing its investment in Canadian cannabis producer Organigram Holdings, this time deepening their partnership through an injection of 124.6 million Canadian dollars ($92.5 million).
The latest move comes after British American Tobacco (BAT) invested CA$6.35 million in the Atlantic Canada-based cannabis company in 2022 and an initial CA$220 million in 2021.
BAT now has a voting common share ownership position of 30% and overall equity interest of 45%.
“We are excited to bring this transformative transaction to Organigram’s shareholders, reinforcing our commitment to delivering shareholder value,” CEO Beena Goldenberg said in a Monday news release.
“This investment bolsters an already strong balance sheet and solidifies our position as a leading cannabis company.
“In addition, this deepens the strategic partnership between Organigram and BAT, and we look forward to continuing to leverage BAT’s global capabilities and scientific expertise.”
The cash injection is going to allow Organigram to further expand globally.
The majority of the CA$124.6 million, or approximately CA$83.1 million, will be used to create a strategic investment pool, named Jupiter, with the rest going to general corporate use.
The Jupiter fund will target investments in emerging cannabis opportunities, after management made geographic expansion a strategic priority.
“This opportunity presents the company with the capital to lay global foundations as the legal recreational cannabis market continues to see significant growth,” Organigram noted in the news release.
Organigram said today’s market conditions are optimal for BAT’s aggressive investment approach for several reasons, including:
- Emerging cannabis legalization trends that are happening at a global level.
- A large number of cannabis companies are undervalued, creating conditions for a buyer’s market in M&A.
- Many cannabis companies are looking for strategic investors to help scale their businesses.
CEO Goldenberg said the strategic investment pool “is expected to accelerate Organigram’s ambitious growth plans, enabling further geographic, technological and product expansion.”
The company said it will be setting up an internal team to source future investment targets.
BAT plans to subscribe for 38.7 million shares at a price of CA$3.2203 per share, for gross proceeds of CA$124.6 million across three tranches.
The move is subject to receipt of certain regulatory approvals and approval from Organigram’s shareholders.
The company’s shares were valued at CA$2.08 in Monday morning trading, up approximately 30% from Friday’s close.
In connection with the closing of the first tranche, BAT will be eligible to appoint up to 30% of the Organigram board.