British American Tobacco Buys Nearly 20% Stake in Organigram

By McKenzie Carpenter Thursday, March 11, 2021

More and more states and countries around the world are changing laws that either decriminalize or legalize marijuana. British American Tobacco, or BAT, and Canadian cannabis business Organigram both announced today the tobacco and nicotine company would be purchasing nearly 20% of the cannabis business.

Person holding cannabis leaf.

About the Companies

BAT is a multinational British company that manufactures and sells tobacco and nicotine products. The business was founded in 1902 and has become one of the top 5 largest tobacco companies in the world.

Organigram is a Canadian-based licensed cannabis company that has been producing and selling medical and recreational marijuana since 2018, when Canada legalized marijuana. To date, the business has raised $378 million in funding from many different investors across several funding rounds.

The cannabis business and the tobacco company both announced today that BAT would be buying a nearly 20% stake in the marijuana company. The tobacco business is paying $175.81 million for the equity stake in hopes of diversifying its portfolio beyond just tobacco and nicotine.

In a press release, the tobacco company said, “Organigram has a proven track record of consumer-led innovation and developing high quality adult-use recreational and medical cannabis products, which are legally available in Canada…”

In the deal, the tobacco company will be buying 58.3 million shares in the cannabis business for $3.79 per share. Since the news of the deal broke, shares in the marijuana company have increased to as much as 47%.

CEO of Organigram, Greg Engel, said “This is a tremendous milestone in the evolution of Organigram. It is instrumental in advancing our commitment to offering consumers innovative cannabis products and to furthering our long-term international strategy.”

As part of the agreement, the collaboration between the two companies will create the Center of Excellence. The Center will focus on developing the next generation of cannabis products, initially focusing on cannabidiol (CBD). Additionally, the tobacco business will have access to Organigram’s R&D (research and development) technologies, product innovation, and cannabis expertise. BAT will also be able to add two members to Organigram’s board.

Today, BAT’s stock has remained steady and Organigram’s stock has increased 28.68%.

Other Cannabis Business Investments

The news of the deal between BAT and Organigram is not the first time large corporations have shifted focus to an ever-growing industry. Startup Savant reported that the medical marijuana market reached a new high amid the COVID-19 pandemic.

In 2018, CNBC reported Marlboro maker Altria invested $1.8 billion in cannabis producer Cronos Group. Last May, Constellation Brands, the company that produces Corona beer, increased its equity stake to 38.6% in marijuana business, Canopy Growth Corporation.

About the Author

Headshot of McKenzie Carpenter

McKenzie Carpenter is a graduate of Central Michigan University with a B.A.A. in Integrative Public Relations and French. McKenzie has previously worked for small businesses and nonprofit organizations.

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