Leading premium hash brand, Tremblant
Cannabis, and craft brand, Laurentian, complement Organigram’s
portfolio of consumer-centric brands
- Strengthens Organigram’s position in the second most
populous province of Quebec
- Expands Organigram’s high-margin, premium brand and product
offering
- Brings Quebec’s top selling hash brand to the Organigram
portfolio, with Tremblant Cannabis
- Adds an artisanal craft brand, Laurentian, to Organigram’s
existing brand portfolio
- Is highly accretive on both a revenue and EBITDA basis
expediting Organigram’s target timing to EBITDA positivity
Organigram Holdings Inc. (TSX: OGI and NASDAQ:
OGI), the parent company of Organigram Inc. (collectively
“Organigram” or the “Company”), a leading licensed producer of
cannabis, is pleased to announce it has acquired all of the issued
and outstanding shares of Laurentian Organic Inc. (“Laurentian”),
in a cash and share transaction for aggregate consideration of $36
million, plus earnout consideration (the “Earnout Consideration”)
payable, if applicable, based on Laurentian surpassing certain
EBITDA thresholds in calendar 2022 and 2023. The Laurentian
acquisition (the “Laurentian Acquisition”) further strengthens
Organigram’s position in the Canadian market through the expansion
of the Company’s portfolio into premium products, including hash
and craft cannabis, in addition to providing an important presence
in the province of Quebec through a scalable cultivation and
operational footprint.
Laurentian was co-founded by Eric Brosseau, Mathieu Lahaie and
Eric Verdier, a trio of highly passionate Quebecers who parlayed
their love of cannabis into a successful cannabis company operating
near the iconic Mont-Tremblant, specializing in high-quality,
artisanal craft cannabis and premium Afghan hash. Organigram is
excited to have a foothold in the Quebec market and is committed to
building on the great progress made by the team at Laurentian
through further investment in people and facilities in the
province. The Company also plans to leverage its strong internal
field sales force and national distribution capabilities to build
on Laurentian’s existing momentum.
“The Laurentian Acquisition marks yet another important
milestone for Organigram as we continue to deepen the focus of our
core business on delighting consumers with innovative products and
brands that deliver unique and memorable experiences,” said Beena
Goldenberg, Chief Executive Officer of Organigram. “Not only does
Laurentian add two great new brands to our portfolio, it also
brings us new premium product offerings with its Afghan hash and
artisanal craft flower, as well as a footprint in the important
market of Quebec. We look forward to building on the momentum that
Laurentian has established to bring these products to even more
Canadian provinces and territories.”
“We founded Laurentian with the goal of bringing the highest
quality hash and cannabis to consumers across Canada. We are
thrilled to be joining Organigram where we will have the
opportunity to leverage their expertise and distribution
capabilities to make this expansion goal a reality,” said Eric
Brosseau, Co-Founder of Laurentian. “The Organigram team has an
unrivaled customer service experience through its rigor and
professional standards and dedicated national sales force and we
are thrilled to be able to work with their team through the next
phase of growth.”
Strategic Rationale
“Organigram has always been highly selective with its M&A
strategy, and when we identified Laurentian, we saw a unique
opportunity to fulfill multiple strategic and financial
objectives,” said Paolo De Luca, Organigram’s Chief Strategy
Officer. “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.”
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. Construction on the expansion efforts is expected
to be realized during the summer of 2022.
Some key highlights supporting the strategic rationale
include:
Accelerates and strengthens Organigram’s presence in the
Quebec market. Laurentian is one of the leading hash companies
in Quebec. With current capacity to cultivate approximately 600 kg
of flower and 1 million units of hash annually with expansion
efforts these are expected to increase to approximately 3,000 kg of
flower and 2 million units of hash by the second half of 20221,
Laurentian is poised for expansion both within Quebec as well as
Canada as a whole. Laurentian is also expected to benefit from
access to additional high-quality indoor flower supply and input
material for hash from Organigram’s Moncton facility, which is
expected to produce 70,000 kg of annualized production capacity by
the end of fiscal 2022.
Hash category continues to grow. The hash category in
Canada is increasing in importance and leveraging Organigram’s
national sales and distribution network, the Company believes that
Laurentian’s product offerings will continue to grow nationwide at
an accelerated pace, bringing Laurentian’s high-quality craft
cannabis products to more consumers.
Premium craft facility provides artisanal hash and cannabis
products. Laurentian is currently undertaking a cultivation and
production expansion that, when complete, will increase the Quebec
footprint from 6,800 sq. ft. to 33,000 sq. ft., more than doubling
of the cultivation footprint in addition to leveraging the
Organigram Moncton campus is expected to substantially increase the
availability of product offerings under the Laurentian and
Tremblant brands.
High-margin accretive business with great opportunity for
growth. Over the last 2 months, Laurentian has been averaging
an annual gross and net revenue run rate of $22 million and $17
million respectively, and an annual EBITDA run rate of $6 million
based on its presence in Quebec, Manitoba, Saskatchewan, and most
recently, Canada’s largest province, Ontario. Leveraging
Organigram’s direct sales team and national distribution,
Laurentian’s products will gain access to major markets currently
not penetrated, including BC, Alberta and Atlantic Canada. Between
local expansion planned at Laurentian’s site, synergies expected to
be realized with Organigram and entrance/scale-up into new/existing
markets the Company is forecasting revenues from the Laurentian and
Tremblant brands to grow beyond the Company’s Fiscal 2022 year-end
of August 31, 2022.
Key Transaction Terms
The purchase price paid on closing (the “Upfront Consideration”)
was $36 million and consisted of:
$10 million in cash, and
$26 million by the issuance of 10,896,442 shares (the “Common
Shares”) based on the volume-weighted average price of Organigram’s
Toronto Stock Exchange listed securities for the five trading days
ending December 20, 2021 equaling $2.3861.
Earnout Consideration, if any, will be payable in Common Shares,
if EBITDA thresholds are met, at two different points:
The first (the “First Earnout Consideration”) and the Second
Earnout Consideration. The First Earnout Consideration is defined
as 30% multiplied by 7.25x Laurentian’s 2022 calendar year EBITDA,
subject to adjustment, which shall be payable in Common Shares of
Organigram.
The Second Earnout Consideration is defined as 19% multiplied by
7.25x Laurentian’s 2023 calendar year EBITDA, subject to
adjustment, which shall be payable in Common Shares of
Organigram.
For the First Earnout Consideration and/or the Second Earnout
Consideration to be paid the total consideration (the “Total
Consideration”) consisting of the Upfront Consideration and the
First and Second Earnout Consideration shall not exceed 7.25x the
applicable year’s EBITDA. The calculations for the Earnout
Consideration shall also be adjusted for certain incremental
capital expenditures ($3.5 million expected to be included as an
adjustment in 2022 and $3.5 million expected to be included as an
adjustment in 2023) and an expected working capital adjustment of
$2.0 million in 2022.
Earnout Consideration payments paid in Common Shares shall be
priced at the closing price on the TSX on the day prior to
settlement. The Laurentian Acquisition has received conditional
approval from the Toronto Stock Exchange subject to customary
conditions. The vendors are arm’s length parties to Organigram. The
Laurentian Acquisition has been approved by Organigram’s Board of
Directors.
Advisors
Hyperion Capital Inc. acted as 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.
About Laurentian Organic Inc.
Operating under the Laurentian and Tremblant Cannabis brands,
Laurentian Organic Inc. is a craft cannabis licensed producer
located near iconic Mont-Tremblant in Quebec. Grown in a greenhouse
under the sun, Laurentian offers a selection of organic flowers
that are hand crafted and cured to perfection and premium hash
products.
Laurentian’s craftspeople are proud Quebecers who are masters of
their art. Their know-how ensures the creation of dried flower,
pre-rolls and hash of superior quality that are specially designed
for cannabis enthusiasts who seek an authentic experience.
About Organigram Holdings Inc.
Organigram Holdings Inc. is a NASDAQ Global Select Market and
TSX listed company whose wholly owned subsidiaries include:
Organigram Inc., a licensed producer of cannabis and
cannabis-derived products in Canada and The Edibles and Infusions
Corporation, a licensed manufacturer of cannabis-infused soft chews
in Canada.
Organigram is focused on producing high-quality, indoor-grown
cannabis for patients and adult recreational consumers in Canada,
as well as developing international business partnerships to extend
the Company's global footprint. Organigram has also developed a
portfolio of legal adult use recreational cannabis brands including
The Edison Cannabis Company, Monjour, Big Bag o’ Buds, SHRED and
Trailblazer. Organigram's facility is located in Moncton, New
Brunswick with another manufacturing facility in Winnipeg,
Manitoba. The Company is regulated by the Cannabis Act and the
Cannabis Regulations (Canada).
Forward-Looking Information
This news release contains forward-looking information. Often,
but not always, forward-looking information can be identified by
the use of words such as “plans”, “expects”, “estimates”,
“intends”, “anticipates”, “believes” or variations of such words
and phrases or state that certain actions, events, or results
“may”, “could”, “would”, “might” or “will” be taken, occur or be
achieved. Forward-looking information involves known and unknown
risks, uncertainties and other factors that may cause actual
results, events, performance or achievements of Organigram to
differ materially from current expectations or future results,
performance or achievements expressed or implied by the
forward-looking information contained in this news release. Risks,
uncertainties and other factors involved with forward-looking
information could cause actual events, results, performance,
prospects and opportunities to differ materially from those
expressed or implied by such forward-looking information include
timing of planned construction, availability of any required
approvals, changes in regulation and market conditions, product
acceptance, realization of expected synergies, achievement of
targets and factors and risks as disclosed in the Company’s most
recent annual information form, management’s discussion and
analysis and other Company documents filed from time to time on
SEDAR (see www.sedar.com) and filed or furnished to the Securities
and Exchange Commission on EDGAR (see www.sec.gov). Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release.
Although the Company believes that the assumptions and factors used
in preparing the forward-looking information in this news release
are reasonable, undue reliance should not be placed on such
information and no assurance can be given that such events will
occur in the disclosed time frames or at all. The forward-looking
information included in this news release are made as of the date
of this news release and the Company disclaims any intention or
obligation, except to the extent required by law, to update or
revise any forward-looking information, whether as a result of new
information, future events or otherwise.
________________________ 1 Provided these expansion plans are
completed on the facility as contemplated. See the cautionary
statement at the end of this news release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211221005411/en/
For Investor Relations enquiries:
investors@organigram.ca
For Media enquiries: Megan McCrae, Senior Vice President
Marketing and Communications megan.mccrae@organigram.ca
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