Marlboro owner Altria makes £1.4bn bet on cannabis

Marlboro owner Altria makes £1.4bn bet on cannabis

Altria Group Inc., the US maker of Marlboros, made a $1.8 billion investment in a Canadian pot company Friday based on a simple premise: Cannabis is growing fast, and cigarettes are not. The transaction is expected to close in the first half of 2019.

Canopy has said it will not sell marijuana products in the USA until pot is legalized at both the federal and state level.

Cronos announced earlier this week that Altria could make a possible investment after Reuters reported the tobacco giant was in talks to acquire Cronos.

"We believe that Cronos Group's excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential", he said in a statement.

The purchase is the second involving a big-money deal connected with a Canadian marijuana company in recent months.

Canadian marijuana company Canopy Growth (CGC) already has received a multibillion dollar investment from Corona owner Constellation Brands (STZ).

"Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth", said Mike Gorenstein, Cronos Group's chairman, president and chief executive officer.

Cronos will use the proceeds to more quickly expand its global infrastructure and distribution footprint while also increasing investments in R&D and brands. Altria's offer of C$16.25 a share represents a 16 percent premium from Thursday's closing price.


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

Coca-Cola (KO) was rumored to be considering an investment in Canadian cannabis company Aurora (ACB).

Altria's bet on Cronos could also prompt more similar deals in the sector, he added.

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 Canopy Growth Corp., another Canadian pot producer.

The Canadian subsidiary of Molson Coors (TAP) has a joint venture with The Hydropothecary Corporation to produce cannabis-infused drinks for the Canadian market.

Philip Morris, which was spun off from Altria and sells the Marlboro brand internationally, has been trying to get approval for Altria to market IQOS in the U.S. Separately, it has asked for regulatory permission to say the device carries a lower health risk than regular tobacco products.

Altria shares rose as much as 3.2 percent to $56.14 on Friday.

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