Marlboro cigarette maker Altria to marry pot with big tobacco in $1.8-billion Cronos deal
NEW YORK — Marlboro cigarette maker Altria Group, Inc. announced a $1.8-billion investment in Cronos Group, Inc. on Friday, which could give it up to 55% ownership of the Canadian cannabis producer.
The deal represents by far the biggest investment by a major tobacco conglomerate in a cannabis company. It comes after Canada legalized the recreational use of marijuana this year, and several other jurisdictions, including some states in the United States, follow suit.
With the Cronos investment, Altria will get a new opportunity to boost revenue as cigarette smoking continues to decline in the US. Federal data from November showed cigarette smoking among US adults reached an estimated 14% in 2017, the lowest level ever.
“As a company that operates predominantly in the highlyregulated tobacco industry, we believe Altria has valuable regulatory and compliance experience that could end up being a key competitive advantage for Cronos, as it competes with other licensed producers for what seems to be a growing set of international opportunities,” Canaccord Genuity analysts wrote in a research note.
Altria will buy 146.2 million of newly issued Cronos shares at C$16.25 per share for a 45% stake. The offer represents a 16.2% premium to the stock’s Thursday close on the Toronto Stock Exchange.
The deal also includes warrants to acquire an additional ownership interest in Cronos at a price of C$19 per share over the next four years, which could raise Altria’s stake to 55%.