Organigram Holdings (TSX: OGI) (NASDAQ: OGI) has seen a strategic investment from that of BAT (NYSE: BTI), whom is more commonly known as British American Tobacco. The arrangement will see British American take a 19.9% equity interest in the Canadian licensed producer.
The transaction amounts to a $221 million investment in the cannabis operator, with 58.3 million common shares being purchased by the firm at a price per share of $3.792. The transaction will also see the two entities enter into a Product Development Collaboration Agreement, or PDC Agreement, to develop “the next generation of cannabis products,” with products to initially focus on CBD.
The PDC will see a Center of Excellence established at Organigram’s Moncton, NB facility, which already holds the required licenses to conduct R&D on cannabis. Both firms are to provide scientists, research, and product developers for the program, with both firms agreeing to provide access to certain IP they hold. Both firms will also have the right to independently, globally commercialize the products, tech, and IP produced under the arrangement, with BAT holding formal ownership.
The investment by BAT is stated to, among other things, “bolster Organigram’s ability to enter the US and other international markets.” Upon closing the company is expected to have a cash and short term investments position of $296 million, of which $30 million will be contributed towards the Center of Excellence.
Under the investment agreement, BAT is entitled to add two members to Organigram’s board of directors. Mr Jeyan Heper is the first such nominee, with the second yet to be named.
Organigram Holdings last traded at $3.62 on the TSX.
Information for this briefing was found via Sedar and Organigram Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
The Grocery Grift: Why Toronto and New York Are About to Light Taxpayer Money on Fire