Cigarette company Imperial Brands has invested in Canadian cannabis company Auxly Cannabis Group to the tune of £75m ($93.2M USD), according to a report by the Financial Times.
The deal, which was announced on Thursday (July 25), will let Imperial convert the investment into a 20 percent stake in Auxly over a period of three years. The cigarette giant will also get positions on Auxly’s board, and Auxly will get access to its vaping arm, Nerudia.
In Canada, the marijuana market is estimated to be worth around $6 billion and could increase to as much as $11 billion in 2025. All cannabis products are scheduled to be legalized in October. Of all the products, vaping is expected to be the fastest-growing sector.
“Diversifying our next-generation products portfolio with this investment provides Imperial with further options for future growth,” said Matthew Phillips, Imperial Brand’s chief development officer.
While tobacco sales are dropping, many companies are looking into different ways to shore up profits. Only Imperial and Altria, which makes Marlboros in the U.S., have made significant moves so far. Altria paid $1.8 billion for a 45 percent stake in Cronos, a different cannabis group in Canada.
In the last year, Imperial appointed Simon Langelier, a medical cannabis expert, to its board, and it took a small stake in cannabis biotech company Oxford Cannabinoid Technologies.
Auxly was reportedly losing money, but the investment will help to improve the company’s financials.
“Imperial has a strong portfolio of intellectual property in the vaping space, which has substantial overlap with the cannabis industry, and it’s found a sensible partner to help seize the commercial opportunity without taking substantial risk,” said Nico von Stackelberg, an analyst at Liberum.
Imperial also said it would give Auxly a “small dedicated team” at Nerudia, which has developed all of Imperial’s vaping products.