Organigram Holdings Inc. announced a C$124.6 million follow-on strategic equity investment from BT DE Investments Inc., a wholly-owned subsidiary of BAT.
“We are excited to bring this transformative transaction to Organigram’s shareholders, reinforcing our commitment to delivering shareholder value. This investment bolsters an already strong balance sheet and solidifies our position as a leading cannabis company. In addition, this deepens the strategic partnership between Organigram and BAT, and we look forward to continuing to leverage BAT’s global capabilities and scientific expertise,” said Beena Goldenberg, CEO of Organigram. “Jupiter, the strategic investment pool, is expected to accelerate Organigram’s ambitious growth plans, enabling further geographic, technological and product expansion.”
"Strengthening Organigram’s position to deliver results"
According to the company, this investment will not only allow Organigram to deliver on its stated ambition to extend its footprint beyond Canada, but also strengthens its financial position for long-term, sustainable growth. "This further enables Organigram to invest in growing the topline of its core business, while optimizing operations to deliver on cost saving efficiencies, thus accelerating earnings growth. The flexibility afforded to the Company by this investment will provide incremental capital to Organigram to pursue new opportunities and expand on existing initiatives aimed at fueling net revenue growth and achieving EBITDA objectives."
"Through this investment, Organigram aims to capitalize on its state-of-the-art facilities, support further workstreams in R&D and product development and deliver impactful product launches. As a result of this, Organigram is poised to deliver further market share gains in this rapidly consolidating market where the Company was able to achieve a #2 market position in Canada over the last two months."
Building on the foundations of the Product Development Collaboration (PDC)
Since March 2021, Organigram’s partnership with BAT has gone from strength-to-strength, most significantly the progress achieved as part of the PDC agreement. "Organigram's commercial business is already seeing significant benefits both from a scientific development standpoint and in terms of revenue driving product capability."
"This transaction furthers BAT’s support of Organigram as a trusted partner and accelerates the focus on innovative cannabis science and R&D outside of combustibles. The PDC is now in late-stage development of a suite of emulsions, novel vapour formulations, flavour innovations, and packaging solutions which are planned to be applied to certain products within Organigram’s portfolio in calendar 2024. We expect these innovations to deliver market share and revenue growth for Organigram, appealing to a broad range of adult consumers seeking new, progressive cannabis formats with efficacious results."
"Jupiter strategic investment pool will accelerate Organigram’s growth ambitions"
The majority of the C$124.6 million investment will be used by Organigram to create a strategic investment pool, named Jupiter. "Jupiter will target investments in emerging cannabis opportunities that will enable Organigram to apply its industry-leading capabilities to new markets. Management has identified that geographic expansion is a strategic priority and this opportunity presents the Company with the capital to lay global foundations as the legal recreational cannabis market continues to see significant growth. Organigram maintains the highest level of regulatory and product stewardship and will continue to monitor the cannabis regulatory environment carefully. As a result, all potential investments will undertake rigorous legal compliance and due diligence processes."
“The opportunity set within the cannabis space has grown significantly since our initial collaboration with BAT in March 2021 and the category continues to expand globally as more adult consumers incorporate cannabis into their lives. The competitive nature of the industry also means that the opportunity for investments is ample for companies with strong balance sheets, industry experience and a proven track record of M&A success,” said Paolo De Luca, Chief Strategy Officer of Organigram. “Organigram’s expertise and continued success in the cannabis industry means that we are well placed to bring best-in-class capabilities to the investment sourcing and due diligence process, as well as post-deal integration. All investments will be considered with Organigram’s long-term strategic vision in mind and with the goal of delivering incremental value to both the Company and our shareholders.”
"Organigram has 10 years of experience within the Canadian cannabis market and has already made several successful cannabis investments. The acquisition and integration of the Edibles and Infusions Corporation, Laurentian Organics Inc., and more recently, its investment in Phylos Bioscience Inc. has propelled Organigram to a market leadership position in gummies and hash, as well as enabling the Company to be first to launch THCV products in Canada. This proven track record combined with Organigram’s industry knowledge can now be applied at a larger scale through Jupiter."
According to the company, current market conditions are optimal for such an investment approach for several reasons:
- Emerging cannabis legalization trends are happening at a global level, as well as an expanding adult consumer base, setting the stage for continued category growth.
- A large proportion of cannabis companies continue to be undervalued compared to their market potential, creating conditions for a “buyer’s market”.
- Many cannabis companies are looking for strategic investors to help scale their businesses, resulting in a high volume of inbound deal opportunities.
- Products arising from the PDC agreement are nearing commercialization. Initial testing has been very positive, and the investment pool enables Organigram to bring these innovations to markets beyond Canada, reaching new adult consumers globally.
To capitalize on this opportunity, Organigram will be setting up an internal team that will be focused on sourcing future investment targets and concluding transactions. "This will ensure that an entrepreneurial approach and best-in-class industry knowledge, including that of the regulatory environment, is applied throughout the sourcing process."
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