BAT Makes $175 Million Cannabis Bet With Organigram Investment

British American Tobacco Plc will acquire a stake of almost 20% in Canadian pot producer Organigram Holdings Inc., its biggest expansion into cannabis.

The companies will collaborate on product development and focus on next-generation cannabis products, they said in joint statements Thursday. The stake is worth $175 million.

BAT has been trying to bolster its portfolio beyond nicotine as an increasing number of people quit smoking or move away from tobacco. The maker of Lucky Strike cigarettes started a city test of CBD vaping products in the U.K. earlier this year. BAT’s shipments of alternative products climbed by a double-digit rate in 2020.

Cannabis provides a natural fit for tobacco companies as they know how to operate in a regulated environment, have experience growing crops and can help farmers shift from tobacco to cannabis, according to Owen Bennett, an analyst at Jefferies.

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