Thursday , August 5 2021

Marlboro maker Altria purchases 45 percent of Cronos for $ 2.4 billion



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Canadian cannabis producer Cronos Group will receive a $ 2.4 billion investment in shares of the Altria Group, one of the world's largest tobacco companies, under a friendly agreement announced on Friday.

Altria, headquartered in Virginia and controlling the Marlboro cigarette maker, will acquire a 45 percent stake in Toronto-based Cronos under initial investment.

Altria may also invest up to $ 1.4 billion in four years, which would increase its stake in Cronos to 55%, according to the agreement.

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As part of the agreement, Altria will have the right to appoint four directors to the board of Cronos, which will be expanded to seven members out of five.

"Altria is the ideal partner for Cronos Group, providing the resources and knowledge we need to significantly accelerate our strategic growth," said Mike Gorenstein, chairman and president of Cronos, in a statement.

He added that Altria has "decades of experience in regulation, government affairs, compliance, product development and brand management that we hope to leverage, particularly as new markets for cannabis open around the world."

Canada is the second country in the world to legalize the pot for recreational use. Several US states also allow the use of cannabis, but it remains illegal under US federal law.

"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria," said Howard Willard, chairman and CEO of Altria.

"We believe that the excellent Cronos Group management team has built the resources needed to compete globally and we look forward to helping Cronos Group realize its significant growth potential."

Altria agreed to pay $ 16.25 per share to acquire 146.2 million shares of Cronos, which is above the pre-announcement price for the shares.

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It will also acquire guarantees that will allow Altria to buy more shares at $ 19 per share within four years.

The value of Canadian publicly traded cannabis companies rose until October 17, when cannabis sales became legal under the rules and regulations set by Ottawa and the provinces.

However, stocks of large pots have generally retreated from their highs in recent weeks amid reports of supply shortages and complications with the sales process under the new regime.

Cronos had already confirmed reports that he was in talks with Altria, which joins Molson Coors, Constellation Brands and other established companies making moves in the cannabis space.

Its stock jumped 35 percent in premarket trading on Friday after the announcement, making it about $ 14 a share (up from $ 10.45 on Thursday on the Nasdaq and $ 13.98 on the Toronto Stock Exchange).

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