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

Lloyd Doyle
December 8, 2018

Altria, owner of Marlboro cigarettes, is making a $2.4 billion (USD) investment into Canadian medical and recreational marijuana company Cronos Group.

Altria also will receive warrants, which, if exercised, would increase its ownership to 55% and provide an additional CA$1.4 billion in proceeds for the integrated marijuana 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%.

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".

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.

Cronos shares were up 23% in pre-market trading, while Altria's stock gained 2%, according to CNBC.

The deal will expand Cronos' board from five to seven seats, with Altria getting a total of four of them.

Meanwhile, the number of countries that have legalized medical cannabis continues to grow, with South Korea among the latest to give the green light. Federal data from November showed cigarette smoking among US adults reached an estimated 14 per cent in 2017, the lowest level ever.


The August investment by Constellation, which makes Corona and other beverages, was the largest to date by a major US corporation in the cannabis market. It is the Virginia-based company's first foray into cannabis.

Altria's investment in Cronos is by far the largest move by Big Tobacco into cannabis, said Martin Landry, an analyst with GMP Securities. 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.

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

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

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 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.

In February, Pyxus bought controlling stakes in two Canadian marijuana producers, Canada's Island Garden and Goldleaf Pharm.

Other reports by Iphone Fresh

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