Yahoo Finance British American Tobacco buys £126m stake in Canadian cannabis business
British American Tobacco (BATS.L) said it will acquire a roughly 20% stake in Canadian cannabis business Organigram (OGI) for £126m ($176m) as it looks to expand its portfolio beyond nicotine.
Organigram is focused on research and product development activities of adult cannabis products, with an initial focus on cannabidiol (CBD).
Under the deal, a BAT subsidiary will acquire a 19.9% equity stake in Organigram to become the largest shareholder, with the ability to appoint two directors to Organigram’s board of directors and representation on its investment committee.
“Through the collaboration, BAT will gain access to cutting-edge R&D technologies, product innovation and cannabis expertise, complementing BAT’s extensive plant-based expertise and development capabilities,” the company said.
It added that 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.
As part of the agreement, a 'Centre of Excellence' will be established to focus on developing the next generation of cannabis products with an initial focus on CBD.
It will be located at New Brunswick, Canada, which holds the Health Canada licenses required to conduct R&D activities with cannabis products.
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Both BAT and Organigram will contribute scientists, researchers, and product developers to the centre.
The deal follows from BAT's pilot launch of Vuse CBD Zone, its first CBD vaping product, in Manchester earlier this year.
Last month, the chief executive of the first cannabis company to IPO in London said the UK can become a hub for the fast-growing industry in Europe.
“There’s no doubt that this is a huge industry, there’s no doubt that it’s bringing a lot of jobs and taxes," said Avihu Tamir, chief executive of Kanabo (KNB.L).
The global legal cannabis market is worth $17.5bn (£13bn, €14bn) and forecast to grow to $65bn by 2027. Growth is being driven by the legalisation of recreational cannabis in parts of North America and increased adoption for medical use worldwide.
The market is still tiny in Europe — forecast to grow to €2bn (£1.7bn) over the next four years — but Tamir said the sector was at a "tipping point".
Meanwhile, Britain is set to see the greatest cannabis medical market growth rate in Europe between 2020-2025, a report said in December.
According to European Cannabis 2020, by international cannabis market research firm Brightfield Group, expectations to allow for domestic cultivation and general practitioners prescribing in the coming years will result in a 2020-2025 compound annual growth rate (CAGR) of 98%.
