Altria, the maker of Marlboro cigarettes announced it intends to invest 2.4 billion Canadian dollars ($1.8 billion) into the cannabis producer Cronos.
Altria's efforts to enter the cannabis space "coincided with a rising interest among the major tobacco companies to explore the cannabis opportunity in the U.S.," Vivien Azer, a Cowen analyst recently said.
Altria has agreed to acquire 146.2 million Cronos shares at a price of 16.25 Canadian dollars per share — a 41.5% premium to the company’s 10-day volume weighted average price on the Toronto Stock Exchange ending November 30, according to Cronos. That was the last unaffected trading day prior to when news first broke that the two companies were in talks for a potential deal, the company said.
"We have asserted since 2016 that cannabis would be a synergistic incremental growth driver for the tobacco industry given the opportunity to leverage IP around heat-not-burn and vapor technology."
Canada's Cronos Group confirmed that it is engaged in discussions concerning a potential investment by Altria Group Inc but said it had not yet reached an agreement.
TORONTO, December 3, 2018 – Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos Group” or the “Company”) today confirmed that it is engaged in discussions concerning a potential investment by Altria Group Inc. (NYSE: MO) (“Altria Group”) in Cronos Group. No agreement has been reached with respect to any such transaction and there can be no assurance such discussions will lead to an investment or other transaction involving the companies.
A deal would mark one of the largest combinations between mainstream tobacco and the booming but volatile marijuana sector, which has seen interest from a variety of major consumer companies that are monitoring the industry for disruptive threats and faster-growing product possibilities.
Also several other companies around the world are pushing into the marijuana sector.
-Corona beer firm pours $4bn into weed
The drinks giant is in talks with local producer Aurora Cannabis about developing marijuana-infused beverages.
It will be interesting to see how the cannabis market and also the consumer will react to the market entry of Marlboro and similar companies.
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