TOBACCO giant Imperial Brands has made its second foray into the cannabis market in a deal with Canadian company Auxly.
The £75m investment will allow Auxly Cannabis Group access to leading vaping technology and product development experts at U.K.-based Imperial Brands. This is the second move by Imperial into the cannabis industry following its investment into fellow U.K. firm Oxford Cannabis Technologies (OCT) in June, last year.
Next Generation Products
Imperial, which makes the Lambert & Butler and Golden Virginia tobacco brands, say the Auxly move is part of an ongoing diversification strategy, which has seen it develop a growing presence in the heated tobacco and electronic vaping sectors.
“Diversifying our Next Generation Product portfolio with this investment provides Imperial with further options for future growth and builds on last year’s investment in Oxford Cannabinoid Technologies,” said Matthew Phillips, Imperial’s Chief Development Officer.
Auxly, which is listed on the Toronto stock exchange, is strongly focused on developing the ‘Generation 2’ Canadian cannabis products, namely; edibles, vapes and lotions which will be legalised this October.
The deal gives Bristol-based Imperial a 19.9 per cent stake in Auxly through a three-year convertible loan at a price of 81 cents per share. Auxly’s stock surged by 20% on release of the news earlier this month, but later slid back.
Auxly Has Been ‘Floundering’
Analysts say the investment is a good move for Auxly which has been ‘floundering’ of late. One analyst writing for Yahoo Finance said some investors had shareholders ‘soured’ on Auxly Cannabis Group due to its ‘low performance, and ‘weak stable companies’
It went on to say the Auxly had been ‘floundering and many questions have been raised by disgruntled shareholders and former investors as to the viability of the business model of the company, and its ability to execute it profitably’.
Big Brands Pile Into Cannabis
OCT is a medical cannabis research company, Backed by Snoop Dogg’s venture firm and Star Wars actor Patrick Stewart, which says it aims to ‘unravel the secrets of a plant that has been stigmatized for decades’. Imperial is the latest consumer goods company to make a foray into cannabis.
Last year Marlboro maker Altria Group announced a $2.4 billion investment into the Cronos Group. Tilray has struck an agreement to collaborate on medical cannabis with Sandoz, part of the Novartis pharmaceutical Group, and Canada’s Canopy Growth is receiving over $5 billion of investment from alcohol giant Constellation Brands.