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Canadian cannabis company Organigram Holdings Inc. (NASDAQ:OGI) (TSX:OGI) announced on Monday a CA$124.6 million ($91.2 million) follow-on strategic equity investment from BT DE Investments Inc., a wholly-owned subsidiary of tobacco giant British American Tobacco p.l.c (BAT) (LSE: BATS) (NYSE:BTI).
Subject to the receipt of certain regulatory approvals, approval from Organigram’s shareholders and other conditions, BAT will subscribe for 38,679,525 shares for CA$3.2203 per share, for gross proceeds of CA$124.6 million across three tranches.
The majority of the CA$83.1 million will be used by Organigram to create a strategic investment pool, named Jupiter. The remainder of CA$41.5 million of the investment will be used for general corporate purposes.
Jupiter will target investments in emerging cannabis opportunities that will enable Organigram to apply its industry-leading capabilities to new markets.
Management has identified that geographic expansion is a strategic priority and this opportunity presents Organigram with the capital to lay global foundations as the legal recreational cannabis market continues to see significant growth.
“Jupiter, the strategic investment pool, is expected to accelerate Organigram’s ambitious growth plans, enabling further geographic, technological, and product expansion,” Beena Goldenberg, CEO of Organigram said.
This transaction furthers BAT’s support of Organigram as a trusted partner and accelerates the focus on innovative cannabis science and research and development outside of combustibles. It bolsters BAT’s voting Common Share ownership position to 30% and overall equity interest to 45% (including non-voting Class A Preferred Shares).
Since March 2021, Organigram’s partnership with BAT has gone from strength to strength, most significantly the progress achieved as part of the product development collaboration (PDC) agreement.
Organigram aims to capitalize on its state-of-the-art facilities, support further workstreams in R&D and product development and deliver impactful product launches. It also allows Organigram to deliver on its stated ambition to extend its footprint beyond Canada while strengthening its financial position for long-term, sustainable growth.
“This investment bolsters an already strong balance sheet and solidifies our position as a leading cannabis company,” Goldenberg continued. “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.”
BAT will subscribe for 12,893,175 million shares on the closing of the first tranche, which is expected to be on or around January 16, 2024, for gross proceeds of CA$41.5 million with the remaining 25,786,350 shares to be subscribed for in two further equal tranches on or around August 30, 2024, and February 28, 2025.
The PDC is now in late-stage development of a suite of emulsions, novel vapor formulations, flavor innovations, and packaging solutions which are planned to be applied to certain products within Organigram’s portfolio in calendar 2024. The innovations are expected to deliver market share and revenue growth for Organigram.
Organigram’s shares traded 40.5172% % higher at $1.63 per share during the pre-market session on Monday morning.
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Photo: Courtesy of NikolayFrolochkin and ganjaspliffstoreuk by Pixabay
