Organigram Holdings Inc. (NASDAQ: OGI) has acquired The Edibles & Infusions Corporation in a deal valued at $35 million consisting of $22.0 million, plus up to an additional $13.0 million in shares (payable upon the EIC business achieving certain earnout milestones. Organigram said that the EIC Acquisition will expand its product offerings and provide an operational footprint in Western Canada.
The edibles category currently represents approximately 4.4% of the Canadian recreational cannabis market of which soft chews (and related formats) collectively are approximately 75%. This is a rapidly growing segment of the overall Canadian market and Organigram said it expects the Canadian market to gradually grow towards the 12%-15% and 85% edible and soft chew (and related formats) category share seen in the U.S. as new product offerings are introduced, and as regulatory changes unfold.
“EIC is an important acquisition to ensure Organigram is consistently at the forefront of cannabis product development. The integration of EIC will continue to provide our consumers access to innovative cannabis products while leveraging Organigram’s national sales and distribution network,” said Greg Engel, Chief Executive Officer of Organigram. “Edible products remain an important product category to Organigram and EIC represents an ideal partner with which to expand our market presence in this category as well as other derivative cannabis categories. EIC’s commitment to research and development, continuous innovation, and its confectionery market leadership strategically aligns with Organigram’s domestic and international strategy. We value James Fletcher’s tremendous knowledge of confectionary manufacturing and proven track record of fulfilling the product needs of some of the world’s largest retailers at Cavalier Candies.”
EIC was co-founded by AgraFlora Organics International Inc. (CSE: AGRA) and James Fletcher, who is the Chief Executive Officer of Cavalier Candies – one of Canada’s oldest confectionery companies. EIC constructed a purpose-built, highly-automated, 51,000-square-foot manufacturing facility located in Winnipeg, Manitoba. The facility employs state-of-the-art equipment designed to produce highly customizable, precise, and scalable cannabis-infused products, including edibles. EIC currently holds a Research License and a Standard Processing License issued under the Cannabis Act and regulations; it is in the process of completing its application to add the activity of the sale of Cannabis 2.0 products to its Standard Processing License. Until EIC receives its Sales License, it is capable of manufacturing products in bulk for further processing, review, and sale by Organigram or third-party licensed producers, for which it may provide white-label services.
The company said it currently expects first sales of EIC manufactured soft chews in Q4 Fiscal 2021 subject to the timing of receipt and commissioning of certain ancillary equipment, completion of quality assurance documentation, and hiring of requisite staff.
“This acquisition, on the heels of the recently completed BAT transaction, provides strong strategic synergies for Organigram’s vision of developing innovative and novel products to serve the Canadian market and beyond,” said Paolo De Luca, Organigram’s Chief Strategic Officer. “Diversifying our manufacturing and R&D base gives us increased ability to fast-track our near-term commercial plans as well as expand our R&D efforts in addition to those already destined for the Centre of Excellence in connection with BAT.”
“Organigram and EIC have enjoyed a collaborative partnership in working towards the closing of this transaction. Working with Organigram, we believe EIC can realize its full potential. Combining our complementary management expertise and business strengths will result in an integrated entity that is poised for further growth in Canada as well as globally in an expanding market for cannabinoid-infused products,” commented James Fletcher, President of EIC. “Our facility at EIC was designed to handle both smaller-batch artisanal manufacturing but, more importantly, large-scale nutraceutical-grade high-efficiency manufacturing with a view to gaining EU GMP certification as well. Indeed, the facility design and all of the equipment specifications were completed with that in mind.”