Altria buys 45% stake in cannabis producer Cronos for $2.4 billion

Altria buys 45% stake in cannabis producer Cronos for $2.4 billion

Altria Group Inc., the maker of Marlboro cigarettes, has struck a deal to buy a large stake in Cronos Group Inc., a cannabis grower in Toronto. The agreement also includes a warrant that, if exercised, could see Altria's ownership rise to 55 per cent for another $1.4-billion.

"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", said Howard Willard, Altria's CEO, in a statement.

"Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth", said Mike Gorenstein, Cronos Group Chairman, President, and Chief Executive Officer.

With the Cronos deal, Altria will get a new opportunity to boost revenue as cigarette smoking continues to decline in the United States.

Altria will acquire 146.2 million Cronos shares at a price of CA$16.25 per share, representing a 41.5% premium to the 10-day average price ending November 30, the last unaffected trading day before Cronos publicly disclosed discussions with Altria.

Cronos is traded on the Toronto Stock Exchange and the Nasdaq under the ticker symbol CRON.

Alabama's Tua Tagovailoa wins Walter Camp Award
The Allen, Texas, product has completed 241 of 340 passes this year for 4,053 yards and 40 touchdowns to seven interceptions. Murray leads the country in total offense (4,945 yards), points responsible for (306) and passing efficiency (205.7).

Altria had been in talks with cannabis companies for months, as its core cigarette business continues to shrink. Aurora Cannabis Inc.'s stock rose 7.8 per cent to close at $7.60 after it announced a new supply deal to Mexico.

The cigarette maker's move follows modest investments in the cannabis sector in the past year by tobacco companies Imperial Brands and Pyxus International, formerly Alliance One International. Canada legalized recreational cannabis in October.

Marijuana, while still illegal on the federal level in the USA, is allowed in an increasing number of states. It said it was doing so because it doesn't "see a path to leadership with these particular products", as well as the regulatory burden it faces to bring them to market. "In fact, we think this partnership makes us collectively a more attractive partner" for other potential investors, Gorenstein said on a conference call Friday.

In June, London-based tobacco company Imperial Brands Plc took an undisclosed stake in closely held Oxford Cannabinoid.

The parent company of Corona beer acquired a $4 billion stake in Canada-based pot producer Canopy Growth last August, upping its ownership of the company to 38 percent from about 10 percent.

The Canadian subsidiary of Molson Coors (TAP) has a joint venture with The Hydropothecary Corporation to produce cannabis-infused drinks for the Canadian market.

Related Articles