The deal follows on from BAT’s pilot launch of Vuse CBD Zone, the first CBD vaping product, in Manchester, UK earlier this year. Photo: Getty Images
British American Tobacco (BATS.L) announced that it will acquire approximately 20% stake in Canada’s cannabis business Organigram (OGI) for £ 126 million (US $ 176 million) to expand its portfolio beyond nicotine.
Organigramm focuses on research and product development activities for adult cannabis products, with an initial focus on cannabidiol (CBD).
Under the agreement, a BAT subsidiary will acquire a 19.9% stake in Organigram to become the largest shareholder. It can appoint two directors to Organigram’s board of directors and be represented on its investment committee.
“The collaboration gives BAT access to the latest R&D technologies, product innovations and cannabis know-how and complements BAT’s extensive herbal know-how and development capabilities,” said the company.
It added that Organigram has a proven record of “innovating consumer-centric and developing high quality adult recreational and medicinal cannabis products” that are legally available in Canada.
As part of the agreement, a “center of excellence” will be established that will focus on developing the next generation of cannabis products with an initial focus on CBD.
It will be located in New Brunswick, Canada, which has the Health Canada licenses required to conduct R&D activities involving cannabis products.
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Both BAT and Organigram will bring scientists, researchers and product developers to the center.
The deal follows on from BAT’s pilot launch of Vuse CBD Zone, the first CBD vaping product, in Manchester earlier this year.
Last month, the chief executive of the first cannabis company to go public in London said the UK could become a hub for Europe’s fast-growing industry.
“There is no doubt that this is a huge industry, there is no doubt that it will bring a lot of jobs and taxes,” said Avihu Tamir, Managing Director of Kanabo (KNB.L).
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The global legal cannabis market is valued at $ 17.5 billion (£ 13 billion, EUR 14 billion) and is expected to grow to $ 65 billion by 2027. The growth is being driven by the legalization of recreational cannabis in parts of North America and its increasing adoption for medical purposes around the world.
The market in Europe is still tiny – it is projected to grow to EUR 2 billion (£ 1.7 billion) over the next four years – but Tamir said the sector is at a “turning point”.
The UK will see the fastest growth rate of the cannabis medical market in Europe between 2020 and 2025, according to a report in December.
According to European cannabis 2020, International cannabis market research firm Brightfield Group’s expectations of enabling home growing and general practitioner prescribing in the coming years will result in an average annual growth rate (CAGR) of 98% for 2020-2025.