Altria, Marlboro maker, takes big stake in marijuana company Cronos

Big Tobacco Company Altria Takes Major Stake in Canadian Cannabis Firm Cronos Group

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The Marlboro maker's $2.4 billion bet on Cronos is by far the biggest move by Big Tobacco into pot, and bodes well for the overall cannabis sector, said Martin Landry, an analyst with GMP Securities.

Tobacco giant Altria Group will invest $2.4 billion in Canadian cannabis producer Cronos group for a 45-per-cent ownership stake as the global market for legal pot continues to grow.

According to a news release, Altria's resources will better position the Cronos Group "to support cannabinoid innovation, create differentiated products and brands across medicinal and recreational categories, and expand its global footprint and growing production capacity".

Coca Cola bottle and glass on picnic table
Coca Cola bottle and glass on picnic table

Canada on October 17 became the second country in the world to legalize pot for recreational use. It is the Virginia-based company's first foray into cannabis.

"I think it shows that the US players - Altria and Constellation - will not buy into a USA cannabis company until it becomes federally legal in the USA", said Mr.

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.

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Altria will nominate four directors to an expanded seven-member Cronos board.

Many stocks in the volatile sector were up on Friday after the deal was announced.

The exclusive partnership will give Cronos additional financial resources, regulatory expertise and product development and commercialization capabilities to tap worldwide cannabis opportunities, the company said in the announcement. 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.

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Short-seller Andrew Left of Citron Research, who has been a critic of Cronos and was betting against the stock going into Friday, said that this deal shows why Canadian growers trade at a premium to US -based cannabis companies. Cronos announced earlier this week that Altria could make a possible investment after Reuters reported the tobacco giant was in talks to acquire Cronos. As part of the deal, Constellation also received new warrants which, if exercised along with its existing warrants, would increase its ownership in Canopy beyond 50 per cent.

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

Altria has agreed to pay $16.25 per share to acquire 146.2 million shares of Cronos. The most attractive piece of the partnership is Altria's experience dealing with regulatory agencies, he said.

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