British American Tobacco (BAT) has announced it will take a near 20% stake in Canadian cannabis producer Organigram for around $US175 million as it seeks to diversify its interests.

The deal will give BAT access to R&D technologies, product innovation and cannabis expertise, with an initial focus on CBD.

Organigram chief executive Greg Engel said the companies will jointly develop new products for oral and vapour-based cannabis delivery and will be able to commercialise any products developed under their own brands.

BAT will become Organigram’s largest shareholder with two directors on the board.