Marl­boro maker places $2.4 bil­lion bet on mar­i­juana

Hartford Courant - - Business - By Associated Press

NEW YORK — One of the world’s big­gest to­bacco com­pa­nies is div­ing into the cannabis mar­ket with a $2.4 bil­lion buy-in.

Marl­boro maker Al­tria Group Inc. is tak­ing a 45 per­cent stake in Cronos Group, the Cana­dian med­i­cal and recreational mar­i­juana provider said Fri­day.

Al­tria will pay an­other $1.4 bil­lion for war­rants that if ex­er­cised, would give the Al­tria a 55 per­cent own­er­ship stake in the Toronto com­pany.

That would mean Al­tria’s in­vest­ment would be in the same league as the $4 bil­lion spent ear­lier this year by Con­stel­la­tion Brands to ac­quire shares of Cana­dian pot pro­ducer Canopy Growth Corp.

The Au­gust in­vest­ment by Con­stel­la­tion, which makes Corona and other bev­er­ages, was the largest to date by a ma­jor U.S. cor­po­ra­tion in the cannabis mar­ket.

What­ever hes­i­ta­tion larger cor­po­ra­tions in the U.S. had about en­ter­ing the cannabis mar­ket ap­pears to be fad­ing if there is a fi­nan­cial jus­ti­fi­ca­tion.

Al­tria’s huge in­vest­ment lit up shares of cannabis com­pa­nies that have be­gun to set up shop in Canada, where recreational use was le­gal­ized this year.

Shares of Cronos Group Inc. jumped 31 per­cent and neared an all-time high at the open­ing bell Fri­day.

Rapid growth in the cannabis mar­ket is ex­pected to con­tinue as le­gal­iza­tion ex­pands in the U.S. and so­cial norms change. On Tues­day, ul­tra-con­ser­va­tive Utah be­came the lat­est state to le­gal­ize mar­i­juana use for med­i­cal pur­poses.

Con­sumers are ex­pected to spend $57 bil­lion per year world­wide on le­gal cannabis by 2027, ac­cord­ing to Ar­cview Mar­ket Re­search, a cannabis-fo­cused in­vest­ment firm. In North Amer­ica, that spend­ing is ex­pected to grow from $9.2 bil­lion in 2017 to $47.3 bil­lion in 2027.

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