Organigram Stock Up On $36M Acquisition Of Quebec-Based Craft Cannabis, Hash Producer

Cannabis producer Organigram Holdings Inc. OGIOGI announced Tuesday that it has acquired all of the issued and outstanding shares of Laurentian Organic Inc.

What Happened?

The Moncton, New Brunswick-based company, agreed to purchase Laurentian for $36 million, plus earnout consideration payable, if applicable, based on Laurentian surpassing certain EBITDA thresholds in calendar 2022 and 2023.

The purchase price included $10 million in cash and $26 million by the issuance of 10.9 million shares. The earnout consideration, if EBITDA thresholds are met, will be payable in common shares.

Hyperion Capital Inc. acted as an exclusive financial advisor, and Goodmans LLP, Lavery De Billy LLP, and McMillan LLP acted as legal advisors to Organigram. Dentons Canada LLP acted as legal advisor to Laurentian.

Why It Matters?

The deal further strengthens Organigram's position in the Canadian market by expanding the company's portfolio into premium products, including hash and craft cannabis, and providing an important presence in the province of Quebec through scalable cultivation and operational footprint.

As the hash category continues to grow, the company believes that Laurentian's product offerings, including Tremblant Cannabis, will continue to grow nationwide at an accelerated pace.

Moreover, leveraging Organigram's direct sales team and national distribution, Laurentian's products will gain access to major markets currently not penetrated, including British Columbia, Alberta, and Atlantic Canada.

Paolo De Luca, the company's chief strategy officer, said that Laurentian represents "a unique opportunity" for  Organigram "to fulfill multiple strategic and financial objectives."

"In Laurentian, we found a company that is not only accretive immediately on both a revenue and EBITDA basis but a company with great brands, a passionate Quebecois employee base, and significant opportunity for growth in new segments," he added.

What's Next?

As part of the transaction, Organigram intends to invest at least $7 million in growth capital expenditures at Laurentian to drive cultivation growth, expand processing and storage space, and to invest in automation -- all of which should increase sales growth and improve margins.

Currently, Laurentian is undertaking a cultivation and production expansion, which will increase the Quebec footprint from 6,800 square feet to 33,000 square feet. Construction on the expansion efforts is expected to be realized during the summer of 2022.

More recent news from Organigram:

• Organigram's Stock Climbs Back Into Pattern After Q4 Revenue Beat
• Organigram Q4 Revenue Grows 22% YoY To $24.9M, Remains #4 Cannabis LP In Canada
• Organigram Launches New CBD Wellness Brand: Vegan-Friendly & Sugar-Free Soft Chews

OGI Price Action

Organigram's shares traded 7.07% higher at $1.97 per share at the time of writing on Tuesday.

Photo: Courtesy of Avery Meeker on Unsplash