British American Tobacco subsidiary ups stake in hemp maker to 40%

An affiliate of British American Tobacco Plc has increased its ownership stake from 19.9% to 40% in hemp-extract wellness product manufacturer Charlotte's Web Holdings Inc.

BAT is the parent company of Reynolds American Inc., which serves as its U.S. subsidiary and operational hub.

Charlotte's Web, based in Louisville, Colo., is listed on the Toronto Stock Exchange.

It is the top U.S. brand in innovative hemp-extract wellness products that include tinctures, capsules, chews and topicals.

The additional stake acquired by BT DE Investments Inc. was slightly smaller than what the companies had announced in March.

In November 2022, the BAT affiliate paid $57.1 million for a 19.9% stake.

The initial BAT subsidiary offer disclosed March 30 was paying $75 million to boost its stake to 110 million common shares.

The companies reported Thursday the BAT subsidiary offer would be worth a combined $65 million and just under 110 million shares.

"This transaction meaningfully strengthens our balance sheet and enhances our capital position," Bill Morachnick, Charlotte Web's chief executive, said in a news release.

"With increased financial flexibility and a streamlined capital structure, we are better positioned to execute our growth strategy, expand access and deliver long-term value for our shareholders."

As part of the increased stake, BAT would have the right to nominate directors in line with its pro rata equity ownership, or have at least two representatives as long as it has at least a 10% holding.

However, the proposed agreement would not permit BAT "any right to direct or control the management or day to day operations of the Charlotte's Web, which will continue to be managed by its board and executive management in the ordinary course."

"The appeal of Charlotte's Web is clear to us: a wide portfolio of high-quality products, strong brand equity, an extensive retail presence and robust business-to-commerce e-commerce platform serving a loyal U.S. consumer base, and a track record of in-depth scientific research," said Kingsley Wheaton, chief growth officer at BAT.

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