Tobacco gi­ant buys pot stake

Irish Examiner - - Business - Tif­fany Kary

Al­tria, the maker of Marl­boro cig­a­rettes for the US mar­ket, is push­ing into the Cana­dian cannabis in­dus­try. This is its first foray into the nascent pot in­dus­try.

Shares of cannabis firms gained on the news.

Al­tria has agreed to ac­quire a 45% stake, for $1.8bn (€1.6bn), in the Cana­dian cannabis pro­ducer Cronos and has war­rants to give it the op­tion to in­crease it to 55%.

The deal gives Al­tria a foothold in Canada, which, in Oc­to­ber, be­came the first ma­jor econ­omy to le­galise mar­i­juana for adult use on a fed­eral level. Cronos, mean­while, gets “prod­uct de­vel­op­ment and com­mer­cial­i­sa­tion ca­pa­bil­i­ties, and deep reg­u­la­tory ex­per­tise”, the com­pany said.

Al­tria also an­nounced it would dis­con­tinue two of its next-gen­er­a­tion tobacco prod­ucts, MarkTen and Green Smoke e-va­por prod­ucts, as well as its oral nico­tine-con­tain­ing prod­ucts, and fo­cus on “more com­pelling, re­duced-risk tobacco prod­uct op­por­tu­ni­ties”.

The com­pany will record a $200m (€176m) write-down. The big­gest com­pa­nies have avoided in­vest­ing in US cannabis busi­nesses, which are le­gal in a hand­ful of states, be­cause of the US fed­eral pro­hi­bi­tion on the drug. That’s made Canada an at­trac­tive place for in­vestors and busi­nesses to push into the grow­ing sec­tor. Al­tria has been grap­pling with the steady de­cline of tobacco smok­ing rates and sees po­ten­tial in mar­i­juana’s move into the main­stream.

Chief ex­ec­u­tive, Howard Wil­lard, said the in­vest­ment is “an ex­cit­ing new growth op­por­tu­nity for Al­tria”.

Al­tria al­ready has a deal to sell Philip Morris’s “heat not burn” IQOS prod­uct in the US, if it gets reg­u­la­tory ap­proval, which would give it ac­cess to a dif­fer­ent mar­ket than that of the tra­di­tional cig­a­rette-smoker.

“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. Mean­while, Al­tria is also said to be in talks to buy a stake in Juul, an­other f a s t - g ro w i n g c o m p a n y threat­en­ing the tra­di­tional cig­a­rette space.

In­vestors cheered the news, send­ing the com­pany’s shares up as much as 2.5% at one stage.

Al­tria had de­clined around 22% this year.

Newspapers in English

Newspapers from Ireland

© PressReader. All rights reserved.