Organigram Holdings German Foray Faces Stiff Competition

Organigram Holdings Inc.’s (TSXV:OGI) investee company will be going up against bigger Canadian players such as Aurora Cannabis Inc. (TSX:ACB), which anticipates increasing its shipments to Germany

SmallCapPower | May 11, 2018: Organigram Holdings Inc. (TSXV:OGI), a Moncton-based medical marijuana producer, announced on Tuesday that it has signed a non-binding term sheet to acquire up to a 25% stake in Alpha-Cannabis Germany (ACG).

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Organigram Holdings CEO Greg Engel remarked, “We are proud to have developed a world-class indoor facility producing Canada’s premier medical cannabis, which is now ready to help support the global cannabis market. As we expand into international market development and technology acquisition, we are pleased to announce our proposed investment in Alpha-Cannabis Germany, the first of what we anticipate will be several international business development announcements. We have taken the time to curate several opportunities which, like ACG, we believe offer excellent strategic fit and add value to our core operations.”

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As per the non-binding term sheet, Organigram Holdings will be investing €1,625,000 in cash and €875,000 worth of Organigram common shares (based on the achievement of milestones) for 25% of the aggregate issued and outstanding shares of Alpha-Cannabis Germany on a fully-diluted basis. Once the agreement is finalized, Organigram will supply ACG with dried cannabis flower and sweet leaf for conversion into extracts for the burgeoning German medical cannabis market. Additionally, both the parties are hopeful of entering into an agreement through which Organigram will have an option to purchase pure synthetic CBD isolate from ACG. Also, both companies expect to jointly submit for future licenses available to supply medical cannabis in the German market.

According to an estimate by Prohibition Partners, cannabis industry consultants out of the U.K., the German medical cannabis market could be worth as much as 10.2 billion euros annually in the coming years. Bigger Canadian cannabis companies, such as Canopy Growth Corporation (TSX:WEED), MedReleaf Corp. (TSX:LEAF), Aphria Inc. (TSX:APH), and Aurora Cannabis Inc. (TSX:ACB), all have subsidiaries/operations in Germany. And, Aurora Cannabis said recently it expects to increase its shipments to the German market during the second half of 2018.

The deal closure is subject to mandatory due diligence, TSXV regulatory approval and all other required regulatory approvals and consents. Organigram Holdings Inc’s stock currently trades at market capitalization of $558.27 million on the TSX with price-to-book ratio of 5.50x.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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