Cannabis company Organigram signs deal with British American Tobacco
MONCTON, N.B. - Organigram Holdings Inc. stock soared by more than 40 per cent Thursday as a subsidiary of one of the globe's biggest tobacco companies purchased a stake in the business.
Organigram's stock jumped by $1.45 to reach $5.07 on the Toronto Stock Exchange after British American Tobacco announced that its subsidiary will buy a 19.9 per cent stake in the Moncton, N.B.-based cannabis company for $221 million.
BAT, whose website advertises a portfolio of brands including Camel and Lucky Strike tobacco and Vype and Vuse vapour products, will buy 58.3 million Organigram shares at a price of $3.792 per share.
Chief executive Greg Engel said Organigram had long been looking for strategic partnerships with consumer packaged goods, beverage and alcohol companies and BAT's offer came at the right time.
"Now there's a significant injection of capital so that's a key for us … to expand our own research and development efforts and for potential market expansion as we prepare to look at international markets," said Engel.
As part of Organigram's deal with BAT, the pair signed a product development collaboration agreement that will see the creation of a "centre of excellence."
It will focus on developing the next generation of cannabis products with an initial focus on cannabidiol (CBD), a compound found in cannabis and hemp that doesn’t produce a high but is believed to relax consumers.
Organigram has been delving into producing high quality chocolate and beverage products with CBD, but the centre will speed that up.
It will be located at Organigram’s indoor facility in Moncton and both companies will contribute scientists, researchers, and product developers.
Engel expects the centre's creation will involve some hiring.
Many staff at a townhall meeting Thursday morning were pleased at the announcement and are looking forward to working at the centre, Engel said.
"Any time you can say, 'hey, we're bringing this research hub to our facility, it generates a lot of interest and excitement among employees.' "
BAT be entitled to add members to Organigram's board.
The company, which was founded in 1902, has been encouraging people who smoke to switch completely to reduced-risk alternatives.
It has committed to providing adults with a wide range of enjoyable and less risky products.
It wants to increase the number of its non-combustible product consumers to 50 million by 2030.
This report by The Canadian Press was first published March 11, 2021.
Companies in this story: (TSX:OGI)
