Marlboro's Parent Company Altria Buys Massive Stake In Cannabis Firm Cronos

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The deal represents by far the biggest investment by a major tobacco conglomerate in a cannabis company.

Altria Group Inc., the USA maker of Marlboro cigarettes, is paying $1.8 billion for a 45 percent stake in Cronos, a Canadian cannabis firm, Quartz reported.

For its cash, the seller of cigarette brands such as Marlboro will get a 45% stake in Cronos and a majority of the seats on the.

Altria's Chairman and CEO Howard Willard said Cronos will serve as the company's exclusive partner in the global cannabis category. 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. As part of the deal, Constellation also received new warrants which, if exercised along with its existing warrants, would increase its ownership in Canopy beyond 50 per cent.

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.

Altria had been in talks with cannabis companies for months, as its core cigarette business continues to shrink. The offer represents a 16.2 per cent premium to the stock's Thursday close on the Toronto Stock Exchange. "And they're seeing a ton of growth", he said in an interview.

Altria's products, however, have lost significant ground to e-cigarette maker Juul Labs Inc over the previous year, as have e-cigarette brands from other major tobacco companies.

Cronos said it will use the capital to accelerate its global growth and expansion, as well as research and development.

Separately Altria also said it would discontinue some of its e-cigarette brands, including all of MarkTen and Green Smoke e-vaper products, based on their financial performance and will take a related pretax charge of US$200 million in the fourth quarter. It has entered into joint ventures to boost its presence and capacity in Canada and overseas, including in Israel and Australia.

After the deal is closed, Altria will have the right to nominate four directors, including one independent, to the Cronos board.

Reuters had first reported on the deal negotiations on Monday.

Cronos shares were up 23% in pre-market trading, while Altria's stock gained 2%, according to CNBC. The company could also be positioning itself for the possible legalization of marijuana across the U.S., Quartz added.