News: Looking beyond tobacco, BAT tries Canadian pot luck.
(Reuters) – British American Tobacco announced Thursday that it would buy a nearly 20% stake in Canadian cannabis producer Organigram for about £ 126 million ($ 175.81 million) as it diversifies beyond its main tobacco business.
Organization Chart grows cannabis and manufactures products from cannabis produced in Canada, where marijuana was legalized in 2018.
Large tobacco and liquor companies in North America have already made large investments in the emerging industries, with cannabis viewed as less harmful alternative to cigarettes.
And with leading US Democratic lawmakers also promising to decriminalize marijuana use, analysts and experts are forecasting record investments in the industry this year.
The deal with Organigram will give BAT access to R&D technology, product innovation and cannabis expertise, a statement said.
A Center of Excellence will be established at Organigramm’s New Brunswick, Canada facility, focusing on the development of next-generation cannabis products, with an initial focus on natural medicines such as cannabidiol.
Both BAT and Organigram will bring scientists, researchers and product developers to the center, BAT said, while the unit that acquires the stake in Organigram will become its largest shareholder and may appoint two directors to the Canadian company’s board of directors.
Organigram’s US-listed shares rose around 50% to $ 4.32 in premarket trading on the Nasdaq. BAT’s shares, listed in London, remained unchanged.
“Organigram has a proven track record in consumer-centric innovation and developing high quality adult recreational and medicinal cannabis products that are legally available in Canada,” said BAT.
Both parties can market all products developed from the collaboration under their own brands.
“As the global cannabis deregulation accelerated, led by the US, we were approached by more and more big tobacco, big pharma and leading FMCG companies looking to invest in the cannabis sector,” said Tristan Gervais, head of cannabis at Chrystal Capital Advising the European Cannabis Merchant Bank.
Marlboro maker Altria has invested in pot maker Cronos Group Inc, while Corona beer maker Constellation Brands Inc has invested in Canopy Growth, the world’s largest cannabis company by market value.
Reporting by Tanishaa Nadkar, Aby Jose Koilparambil and Shariq Khan in Bengaluru; Arrangement by Saumyadeb Chakrabarty, Kirsten Donovan
Original Source © Reuters