Published: Mon, December 10, 2018
Money | By Wilma Wheeler

Altria gets into pot business with US$1.8 bil Cronos stake

Altria gets into pot business with US$1.8 bil Cronos stake

Altria also agreed to make Cronos its exclusive partner for worldwide cannabis opportunities.

Cannabis stocks climbed Friday after Altria Group Inc., the maker of Marlboro cigarettes for the USA market, agreed to buy a minority stake in Cronos Group Inc., the fourth-largest Canadian cannabis producer by market valuation.

Altria's stock fell by almost 25 percent this year and revenue is expected to grow by only 1 percent this year and in 2019, CNN Business reported. Altria has agreed to buy 146.2 million shares at closing at a price of C$16.25 per share.

Cannabis companies are hot right now.

In the future, Altria will be able to increase its share to 55%, the Agency added.

Cronos Chairman and CEO Mike Gorenstein said Altria is an ideal partner as it can offer the "resources and expertise we need to meaningfully accelerate our strategic growth".

News of the deal has caused to Cronos' stock price to jump by almost 25% in pre-market trading. Chief Financial Officer Hugh Johnston told analysts during its earnings call in October that "it's fair to say we look at everything" in response to a question about cannabis.

As well, the number of countries that have legalized medical cannabis continues to grow, with South Korea among the latest to give the green light.

"As one of the largest companies in the adult consumer products sector, Altria has decades of experience in regulatory, government affairs, compliance, product development and brand management that we expect to leverage, particularly as new markets for cannabis open around the world", Cronos said in its press release. Constellation Brands Inc announced a $3.8-billion investment in Canopy Growth Corp in August, while Coca-Cola Co said in September it was watching the space for alliances that could potentially help it develop products containing cannabinoid oil.

Altria's huge investment lighted up shares of cannabis companies that have begun to set up shop in Canada, where recreational use was legalized this year.

An investment from Altria is expected to provide Cronos Group an opportunity for growth and expansion.

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