Marlboro-Maker Investing $2.4 Billion in Canadian Cannabis Producer Cronos

by Ben Pena December 10, 2018, 1:37
Marlboro-Maker Investing $2.4 Billion in Canadian Cannabis Producer Cronos

One of the world's biggest tobacco companies is diving into the cannabis market with a $2.4 billion investment in Cronos Group, a Canadian medical and recreational marijuana company.

The deal gives Altria an up to 55 per cent stake in Cronos and is the latest in a string of investments from consumer companies hoping to benefit from Canada's move to legalize marijuana for recreational use.

"Altria's experience is very wide-ranging - not just in tobacco, but in adult beverages in different categories and decades of experience in how to bring different products to market", Cronos Chief Executive Officer Michael Gorenstein said on a call with analysts.

The president and CEO of Cronos, Mike Gorenstein, says the agreement with Altria will give the Toronto-based company the resources to expand more quickly and increase its investments in research and development. The company could also be positioning itself for the possible legalization of marijuana across the U.S., Quartz added.

The value of publicly-traded Canadian cannabis companies had soared leading up to October 17, when sales of cannabis became legal under rules and regulations established by Ottawa and the provinces.

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Reuters had first reported on the deal negotiations on Monday.

Altria's investment marks the latest move by a USA company in an established industry to tap the burgeoning Canadian cannabis industry.

— Coca-Cola, Pepsi, Anheuser-Busch and Guinness brewer Diageo haven't jumped in yet, but have said they're watching closely as the market for cannabis and its extracts evolves.

— There are a handful of companies listed on the Toronto Stock Exchange devoted exclusively to cannabis, either for medicinal or recreational use, or both: Canopy Growth Corp., Aurora Cannabis Inc. and Cronos Group Inc. Altria has agreed to buy 146.2 million shares at closing at a price of C$16.25 per share. Aurora Cannabis Inc. rose as much as 11 percent, Canopy Growth Corp. climbed 7.3 percent and Tilray Inc. gained 5.5 percent.

— This fall, Canada became the second nation — and by far the largest — to legalize recreational marijuana use and has become the epicenter of large cannabis companies.

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