The 75 million British pounds that imperial will invest is convertible into a 19.9 percent stake in Auxly over a three-year term. This will grant Auxly global licences to Imperial’s vaping technology and access to its brand, Nerudia.
“Diversifying our NGP portfolio with this investment provides Imperial with further options for future growth and builds on last year’s investment in Oxford Cannabinoid Technologies”
The transaction between the two business is expected to be concluded by the third quarter of 2019, and will build on Imperial’s initial entry into the cannabis market in June 2018, when it bought a stake in Oxford Cannabinoid Technologies (OCT).
“Diversifying our NGP portfolio with this investment provides Imperial with further options for future growth and builds on last year’s investment in Oxford Cannabinoid Technologies,” said Imperial’s Chief Development Officer, Matthew Phillips. RTT News reported that Imperial Brands aims to accelerate the delivery of Auxly’s business plan ahead of regulatory change to the Canadian cannabis market, in October 2019.
As of October 2019, Canada will allow the legal sale of derivative products, such as cannabis edibles, cannabis extracts like vapes, and cannabis lotions and oils. However, vaping products are expected to be the segment of the derivative market that will expand the fastest.
Currently, the legal Canadian cannabis market is estimated st C$3 billion a year, and by 2025 it is forecast to grow to around C$10 billion. Meanwhile, said Imperial Brands, the derivative cannabis products market is expected to be worth C$6 billion by 2025.
A similar investment by Altria
In 2018, Marlboro maker Altria Group Inc. had similarly announced that it would invest 1.8 billion in Canadian cannabis company Cronos Group Inc., which is the fourth most valuable publicly listed marijuana company, with a total valuation of about $1.9 billion. As cigarette sales keep declining, the tobacco giant’s market value had dropped significantly and Altria’s e-cigarette brands, MarkTen and Green Smoke, had only captured a small slice of the market.
Hence Altria had announced that it would discontinue the sales of these devices and of its Verve nicotine gum, and invest in Juul and Cronos instead. “We do not see a path to leadership with these particular products and believe that now is the time to refocus our resources,” said CEO Howard Willard in a news release at the time
