Please ensure Javascript is enabled for purposes of website accessibility

Imperial Brands to Invest CA$123 Million in Auxly Cannabis Group

By Joe Tenebruso - Updated Jul 29, 2019 at 4:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The companies will work together to create cannabis-containing vaping products.

Auxly Cannabis Group's (CBWTF -1.98%)(XLY 0.00%) stock popped more than 20% on July 25, after the company announced that Imperial Brands (IMBB.Y 9.29%) will invest approximately 123 million in Canadian dollars in exchange for convertible debt that could give the tobacco giant a nearly 20% ownership stake in the Canadian cannabis company. 

As part of the deal, Auxly will receive global licenses to Imperial Brands' vaping technology for cannabis use and access to its vapor research and development operations. Auxly will also work closely with an Imperial Brands team to develop a "portfolio of new and enhanced vapor products and brands." Additionally, Auxly will be Imperial Brands' exclusive partner for the "future development, manufacture, commercialization, sale, and distribution of cannabis products of any kind anywhere in the world."

A vaporizer on a table next to some dried cannabis

Auxly Cannabis Group and Imperial Brands are forming a partnership to create cannabis-containing vapor products. Image source: Getty Images.

"This investment from Imperial Brands will enhance Auxly's ability to continue to deliver on our business plans and accelerate our growth initiatives to expand our portfolio of branded derivative products," Auxly President Hugo Alves said in a press release. "The timing is ideal as we prepare to bring our portfolio of innovative cannabis products to the Canadian market following the legalization of edibles, extracts, and topicals later this year."

In return for its CA$123 million cash investment, Imperial Brands will receive a debenture that can be converted into 19.9% ownership of Auxly at a conversion price of $0.81 per share at anytime over its three-year term. If Imperial Brands chooses to not convert the debenture into Auxly stock, the loan will be repayable in full at the end of the term.

The deal is expected to close in the third quarter of 2019, subject to approval by the TSX Venture Exchange.

Editor's note: This article has been updated to clarify that the amount invested by Imperial Brands is in Canadian dollars rather than U.S. dollars.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Imperial Brands PLC Stock Quote
Imperial Brands PLC
IMBB.Y
$23.25 (9.29%) $1.98
Auxly Cannabis Group Inc. Stock Quote
Auxly Cannabis Group Inc.
CBWTF
$0.12 (-1.98%) $0.00
Auxly Cannabis Group Inc. Stock Quote
Auxly Cannabis Group Inc.
XLY
$0.15 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.