- Organigram and BAT deepen partnership through C$124.6 million
investment with 38.7 million shares to be issued over three
tranches
- Organigram to use C$83.1 million of the investment to create
“Jupiter,” a strategic investment pool designed to expand
Organigram’s geographic footprint and capitalize on emerging growth
opportunities
- C$41.5 million of the investment will be used for general
corporate purposes
- Investment enhances strategic Product Development Collaboration
between BAT and Organigram, which focuses on cutting-edge R&D
and product innovation
- BAT to increase voting Common Share ownership position to 30%
and overall equity interest to 45% (including non-voting Class A
Preferred Shares)
Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), (the
“Company” or “Organigram”), a leading licensed producer of
cannabis, is pleased to announce a C$124.6 million follow-on
strategic equity investment from BT DE Investments Inc., (the
“Investment”), a wholly-owned subsidiary of BAT (LSE: BATS and
NYSE: BTI) (“BAT”), a leading, multi-category consumer goods
business with a purpose to build A Better Tomorrow.™
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“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
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 months1.
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.
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.
Proposed Private Placement of Common Shares and Convertible
Preferred Shares
Subject to the receipt of certain regulatory approvals, approval
from Organigram’s shareholders and other conditions, BAT will
subscribe for 38,679,525 shares at a price of C$3.2203 per share,
for gross proceeds of C$124.6 million across three tranches.
BAT will subscribe for 12,893,175 million shares on the closing
of the first tranche (currently expected to be on or around January
16, 2024) for gross proceeds of C$41.5 million with the remaining
25,786,350 shares to be subscribed for in two further equal
tranches on or around August 30, 2024 and February 28, 2025.
To the extent BAT exceeds 30.0% holding of outstanding Common
Shares, it will be issued non-voting Class A convertible preferred
shares (“Preferred Shares”). Accordingly, in aggregate, based on
Organigram’s current 81,161,630 Common Shares outstanding,
12,999,231 Common Shares will be issued, and the remaining
25,680,294 shares will be initially issued as Preferred Shares. The
Preferred Shares will be eligible for conversion into voting Common
Shares at BAT’s option, provided that such conversion would not
result in BAT’s voting interest in the Company exceeding 30%.
In connection with the closing of the first tranche of the
Investment and subject to approval by Organigram’s shareholders,
the Company will file articles of amendment to create the new class
of Preferred Shares to be issued to BAT in the Investment.
Class A Preferred Shares
Each Preferred Share shall be economically equivalent to a
Common Share and will be convertible into Common Shares at the
option of BAT without payment of any additional consideration. The
conversion ratio shall initially be one-for-one, and post-issuance
shall increase at a rate of 7.5% per annum, compounded annually,
until such time as the Preferred Shares are converted into Common
Shares or the aggregate equity interest of BAT in Organigram
(inclusive of both the Common Shares and Preferred Shares as if
converted into Common Shares) reaches 49%. BAT shall be
periodically required to convert Preferred Shares to the extent
that it holds less than 30% of the Common Shares outstanding.
Board Representation
In connection with the closing of the first tranche, Organigram
and BAT will enter into an amended and restated IRA, pursuant to
which BAT will be eligible to appoint up to 30% of the Board.
Investment Approvals
The Investment constitutes a “related party transaction” under
Multilateral Instrument 61-101 - Protection of Minority Security
Holders in Special Transactions (“MI-61-101”) and will require
“majority of the minority” approval under MI 61-101. The Investment
will also require disinterested shareholder approval under Section
604(a)(ii) of the TSX Company Manual. Completion of the Investment
is also subject to the approval of the TSX and approval under the
Competition Act (Canada).
The Company intends to obtain the requisite shareholder approval
at its annual and special shareholders’ meeting to be held on or
around January 15, 2024. The closing of the first tranche is
expected to occur thereafter, subject to the satisfaction of the
closing conditions under the subscription agreement entered into
between Organigram and BAT, a copy of which will be available on
Organigram’s SEDAR+ profile at www.sedarplus.ca.
Additional information regarding the Investment will be included
in a material change report to be filed by Organigram on
www.sedarplus.ca. This press release is only a summary of certain
principal terms of the Investment and is qualified in its entirety
by reference to the more detailed information contained in the
material change report.
About Organigram Holdings Inc.
Organigram Holdings Inc. is a NASDAQ Global Select Market and
TSX listed company whose wholly owned subsidiaries include
Organigram Inc. a licensed producer of cannabis, cannabis-derived
products and cannabis infused edibles in Canada.
Organigram is focused on producing high-quality cannabis for
patients and adult recreational consumers, as well as developing
international business partnerships to extend its global footprint.
Organigram has also developed and acquired a portfolio of legal
adult-use recreational cannabis brands, including Edison, Holy
Mountain, Big Bag O’ Buds, SHRED, SHRED’ems, Monjour, Laurentian,
Tremblant Cannabis and Trailblazer. Organigram operates facilities
in Moncton, New Brunswick and Lac-Supérieur, Quebec, with a
dedicated edibles manufacturing facility in Winnipeg, Manitoba. The
Company is regulated by the Cannabis Act and the Cannabis
Regulations (Canada).
About BAT
BAT is a leading, multi-category consumer goods business with a
purpose to build A Better Tomorrow™ by reducing the health impact
of its business through offering a greater choice of enjoyable and
less risky products for adult consumers.
BAT continues to be clear that combustible cigarettes pose
serious health risks, and the only way to avoid these risks is not
to start or to quit. BAT encourages those who would otherwise
continue to smoke to switch completely to
scientifically-substantiated, reduced-risk alternatives*†. In order
to deliver this, BAT is transforming into a truly consumer-centric
multi-category consumer products business.
BAT’s ambition is to have 50 million consumers of its
non-combustible products by 2030 and to generate £5billion of New
Categories revenue by 2025. BAT has set stretching ESG targets
including achieving carbon neutrality for Scopes 1 & 2 by 2030
and eliminating unnecessary single-use plastic and making all
plastic packaging reusable, recyclable or compostable by 2025.
BAT employs over 50,000 people. The BAT Group generated revenue
of £27.65 billion in 2022 and profit from operations of £10.5
billion.
BAT’s Strategic Portfolio is made up of its global cigarette
brands and a growing range of reduced-risk*† New Category tobacco
and nicotine products and traditional non-combustible tobacco
products. These include vapour, tobacco heating products, modern
oral products including tobacco-free nicotine pouches, as well as
traditional oral products such as snus and moist snuff. In the
first half of 2023, BAT had 24 million consumers of its
non-combustible products, a rise of 1.5 million on full year
2022.
* Based on the weight of evidence and assuming a complete switch
from cigarette smoking. These products are not risk free and are
addictive. † Our vapour product Vuse (including Alto, Solo, Ciro
and Vibe), and certain products, including Velo, Grizzly, Kodiak,
and Camel Snus, which are sold in the U.S., are subject to FDA
regulation and no reduced-risk claims will be made as to these
products without agency clearance.
Forward-Looking Information
This news release contains forward-looking information. Often,
but not always, forward-looking information can be identified by
the use of words such as “plans”, “expects”, “estimates”,
“intends”, “anticipates”, “believes” or variations of such words
and phrases or state that certain actions, events, or results
“may”, “could”, “would”, “might” or “will” be taken, occur or be
achieved. Forward-looking information involves known and unknown
risks, uncertainties and other factors that may cause actual
results, events, performance or achievements of Organigram to
differ materially from current expectations or future results,
performance or achievements expressed or implied by the
forward-looking information contained in this news release. Risks,
uncertainties and other factors involved with forward-looking
information could cause actual events, results, performance,
prospects and opportunities to differ materially from those
expressed or implied by such forward-looking information include
changes to market conditions, consumer preferences and regulatory
climate, and factors and risks as disclosed in the Company’s most
recent annual information form, management’s discussion and
analysis and other Company documents filed from time to time on
SEDAR+ (see www.sedarplus.ca) and filed or furnished to the
Securities and Exchange Commission on EDGAR (see www.sec.gov).
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. Although the Company believes that the assumptions
and factors used in preparing the forward-looking information in
this news release are reasonable, undue reliance should not be
placed on such information and no assurance can be given that such
events will occur in the disclosed time frames or at all. Such
assumptions include, without limitation, the receipt of approval
from Organigram’s shareholders, approval from the Toronto Stock
Exchange and approval under the Competition Act (Canada), that all
conditions to the closing of the Investment will be satisfied, that
the Investment will be completed on the terms set forth in the
Subscription Agreement, and that all three tranches of the
Investment will close. The forward-looking information included in
this news release are made as of the date of this news release and
the Company disclaims any intention or obligation, except to the
extent required by law, to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise.
Investor Presentation Related to Transaction
The investor presentation will be available on the Company’s
website at: http://www.organigram.ca/investor-presentation
1Source: Adjusted market model as of Oct 4th, based on HiFyre,
Weedcrawler (QC), Board Data (NS/NB)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231106603579/en/
For Investor Relations enquiries: Max Schwartz, Director
of Investor Relations investors@organigram.ca
For Media enquiries: Megan McCrae, Senior Vice President
– Marketing and Communications megan.mccrae@organigram.ca
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