Cig­a­rette maker in­vests $4.2B in Cana­dian cannabis pro­ducer

Times Colonist - - Business - ARMINA LIGAYA

TORONTO — Marl­boro maker Al­tria Group will in­vest $2.4 bil­lion in Cana­dian cannabis pro­ducer Cronos Group Inc. — mark­ing a ma­jor foray by Big Tobacco into the pot sec­tor — as the global mar­ket for weed con­tin­ues to grow.

The Vir­ginia-based par­ent of the com­pany be­hind Marl­boro, Par­lia­ment and other cig­a­rette brands will ac­quire a 45 per cent own­er­ship stake in Cronos with the ini­tial in­vest­ment, an­nounced Fri­day.

Al­tria can also in­vest up to a fur­ther $1.4 bil­lion within four years that would in­crease its own­er­ship stake in the Toronto-based pot pro­ducer to 55 per cent un­der the ar­range­ment.

“Al­tria brings scale, ex­per­tise and com­ple­men­tary ca­pa­bil­i­ties that we be­lieve will en­able us to ex­pand the scope and en­hance the scale of our com­pany,” said Mike Goren­stein, chair­man, pres­i­dent and chief ex­ec­u­tive of Cronos on a call with an­a­lysts Fri­day.

Cronos will re­main a Cana­dian com­pany, head­quar­tered in Toronto, Goren­stein said.

As part of the agree­ment, Al­tria will have the right to nom­i­nate four di­rec­tors to the Cronos board, which will be ex­panded to seven mem­bers from five.

Al­tria’s in­vest­ment in Cronos as its ex­clu­sive partner in the emerg­ing global cannabis cat­e­gory rep­re­sents an “ex­cit­ing new growth op­por­tu­nity” for the com­pany, said chair­man and chief ex­ec­u­tive of­fi­cer Howard Wil­lard.

“We be­lieve Cronos Group’s ex­cel­lent man­age­ment team has built ca­pa­bil­i­ties nec­es­sary to com­pete glob­ally, and we look for­ward to help­ing Cronos Group re­al­ize its sig­nif­i­cant growth po­ten­tial,” he said in a state­ment.

Shares of Cronos surged as much as 33 per cent to $18.56 on the Toronto Stock Ex­change from its $13.98 closing price on Thurs­day. It was trad­ing at $16.79 by Fri­day af­ter­noon.

Canada on Oct. 17 be­came the sec­ond coun­try in the world to le­gal­ize pot for recre­ational use. Sev­eral U.S. states have le­gal­ized cannabis for med­i­cal or recre­ational use, but pot re­mains il­le­gal un­der fed­eral law.

How­ever, the po­lit­i­cal cli­mate south of the border has been warm­ing up to cannabis. For ex­am­ple, leg­is­la­tion that would al­low for the full le­gal­iza­tion of in­dus­trial hemp in the U.S. and ease re­stric­tions on the cannabis com­pound CBD is work­ing its way through the U.S. leg­isla­tive process.

Dur­ing the U.S. midterm elec­tions, Michi­gan be­came the lat­est state to ap­proval the le­gal­iza­tion of recre­ational cannabis, and Utah and Mis­souri ap­proved the drug for med­i­cal pur­poses.

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.

And as global cig­a­rette con­sump­tion con­tin­ues to de­cline, Big Tobacco has been look­ing for new ar­eas for growth such as eci­garettes and, now, pot.

GENE J. PUSKAR. AS­SO­CI­ATED PRESS

Marl­boro maker Al­tria is div­ing into the Cana­dian cannabis mar­ket with a $2.4-bil­lion in­vest­ment in Toronto-based med­i­cal and recre­ational mar­i­juana provider Cronos Group.

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