Organigram Holdings Inc., a prominent cannabis producer, recently announced a strategic equity investment of C$124.6 million ($91.3 million) from BT DE Investments Inc., a subsidiary of consumer goods titan BAT (LON:BATS). This news sparked a 10% surge in Organigram's stock during premarket trading on Monday.
A substantial part of this investment, approximately C$83.1 million, will be funneled into "Jupiter," Organigram's strategic growth initiative aimed at exploring emerging cannabis opportunities and expanding geographically. The remaining C$41.5 million is allocated for corporate purposes.
The investment strengthens the existing partnership between Organigram and BAT, which dates back to March 2021. This partnership has made significant strides through the Product Development Collaboration (PDC) agreement. Currently in its late-stage development, the PDC agreement is set to introduce a series of emulsions, novel vapor formulations, flavor innovations, and packaging solutions to Organigram's portfolio by 2024.
BAT will acquire 38,679,525 shares at a price of C$3.2203 per share, generating gross proceeds of C$124.6 million across three tranches. The first tranche is anticipated around January 16, 2024. If BAT's holding of outstanding Common Shares exceeds 30.0%, it will receive non-voting Class A convertible preferred shares that are economically equivalent to a Common Share and can be converted into Common Shares at BAT's discretion.
This strategic investment is considered a "related party transaction" under Multilateral Instrument 61-101 and necessitates various approvals from authorities including the majority of the minority under MI 61-101, disinterested shareholder approval under Section 604(a)(ii) of the TSX Company Manual, and approval from TSX and under the Competition Act (Canada).
Beena Goldenberg, CEO of Organigram, expressed that this investment not only fortifies their partnership with BAT but also propels Organigram's growth plans in geographic, technological, and product areas. Despite a 64% YTD decline in Organigram's stock, this move is expected to bolster the company's position in the rapidly growing global legal recreational cannabis market.
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