Marlboro maker leaps into the cannabis trade with $2.4B
- Author: Anthony Vega Dec 10, 2018,
Dec 10, 2018, 1:36
As of publication, Cronos is trading at or around Dollars $13.00 per share, and Altria is trading at or around USD $55.43.
Altria, which also owns Philip Morris USA, will invest $1.8 billion in Canada-based Cronos Group for a 45 percent stake in the company. Cronos will remain a Canada-based company and will continue to be led by its existing management team.
"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", Howard Willard, Altria's chairman and chief executive officer said in a statement.
Pending regulatory approval, the deal is expected to close within the first half of 2019.
Cronos plans to prioritize research and development, innovation and developing brands.
Cronos CEO Mike Gorenstein said the investment "puts us in an wonderful position to succeed in a number of areas". We want to work with local partners to create value in the supply chain.
"An investment of this magnitude provides overall legitimacy to the industry as a whole and should represent a positive catalyst for the sector, with the news likely to drive valuations higher (particularly considering the sector's recent pullback)", Canaccord Genuity analyst Matt Bottomley wrote in a note. "We believe it is an adjacent business and a complementary business".
The agreement allows Altria to nominate four directors to Cronos' board of directors, including one independent director.
Altria had been assessing market opportunities in the cannabis industry since at least September.
The value of publicly-traded Canadian cannabis companies had soared leading up to October 17, when sales of cannabis became legal under rules and regulations established by Ottawa and the provinces.
Here's one way to get investors back into the battered marijuana sector - throw $1.8 billion into it.
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.
This story will be updated throughout the day.