Altria invests $1.8 billion in cannabis company Cronos
Altria invests $1.8 billion in cannabis company Cronos
CanadaIndustryMarlboro Maker Investing $2.4 Billion in Canadian Cannabis Producer Cronos Leafly Canada Staff
08 December, 2018, 12:02
The August investment by Constellation, which makes Corona and other beverages, was the largest to date by a major United States corporation in the cannabis market.
According to the Mail, the company behind the tobacco giant, Altria Group Inc. revealed it is investing a reported CAN $2.4bn (US $1.8bn / £1.4bn) into Cronos Group, for a 45 percent stake in the Canadian medical and recreational marijuana provider.
The agreement includes a warrant to acquire additional shares over the next four years that could give the Altria, which is based in Richmond, Virginia, a 55 per cent ownership stake in the Toronto company.
Over this past year, Altria's stock (NYSE:MO) has fallen almost 5%, but its shares rose 25% Friday after this news was released and Cronos (NASDQ:CRON) rose 30%.
Altria's investment in Cronos as its exclusive partner in the emerging global cannabis category represents an "exciting new growth opportunity" for the company, said its chairman and chief executive officer Howard Willard.
Coca-Cola (KO) was rumored to be considering an investment in Canadian cannabis company Aurora (ACB).
Major pot stocks have generally pulled back from their highs in recent weeks amid reports of supply shortages and complications with the sales process under the new regime. Marijuana, while still illegal on the federal level in the USA, is now allowed in an increasing number of states, while Canada now represents a large laboratory for the nascent industry.
Many stocks in the volatile sector were up on Friday after the deal was announced. It's a logical fit, because "big tobacco knows how to cultivate crop, knows how to deal with regulators, they are at the forefront of vaporization technology, and they also arguably have less reputational risk than other fast-moving consumer goods", he said.
Altria will nominate four directors to an expanded seven-member Cronos board.
Canadian marijuana company Canopy Growth (CGC) already has received a multibillion dollar investment from Corona owner Constellation Brands (STZ).
"Altria expects its investment to help Cronos Group accelerate its growth strategies and its R&D; and intellectual property development", according to the statement.
In February, Pyxus bought controlling stakes in two Canadian marijuana producers, Canada's Island Garden and Goldleaf Pharm.
Meanwhile, Molson Coors launched a joint venture called Truss with Quebec-based cannabis producer Hexo Corp.in October.
Cronos confirmed last Friday that it was in talks with Altria after a Reuters report. Altria has agreed to buy 146.2 million shares at closing at a price of C$16.25 per share.
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