Malboro Maker Invests $2.4 Billion into Cannabis Company-T.CRON-P.CANNABIS

Galtero Lara
Diciembre 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 is also in talks to take a minority stake of between 20 per cent and 40 per cent in e-cigarette maker Juul Labs Inc, sources told Reuters last month.

As part of a strategic investment, Altria will acquire a 45-percent equity stake in Cronos at a price of C$16.25 with a warrant to buy incremental shares at a price of C$19 per share which can be exercised over four years from the transaction closing date.

"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", Howard Willard, Altria's chairman and chief executive officer, said Friday in a statement.

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.

Altria will acquire 146.2 million Cronos shares at a price of CA$16.25 per share, representing a 41.5% premium to the 10-day average price ending November 30, the last unaffected trading day before Cronos publicly disclosed discussions with Altria.

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

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Many alcoholic beverage, tobacco and other consumer products companies may want to bet on cannabis.

Coca-Cola (KO) was rumored to be considering an investment in Canadian cannabis company Aurora (ACB).

The deal is a "big endorsement" for Cronos and is "reassuring" for the industry, amid rising concerns that pot companies' valuations may be too lofty, Landry said. "In fact, we think this partnership makes us collectively a more attractive partner" for other potential investors, Gorenstein said on a conference call Friday.

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

Canadian marijuana company, Canopy Growth, for example, has received a multibillion dollar investment from Corona owner Constellation Brands, CNN reported.

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's stake in Cronos will start at 45pc, with the option to climb to majority control in the future.

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