Tobacco giant Altira invests $ 1.8 billion in Canadian cannabis company Cronos Group. It will give Altria a 45% stake…
Tobacco giant Altira invests $ 1.8 billion in Canadian cannabis company Cronos Group. It will give Altria a 45% stake in the company, with Altria increasing its share to 55% over the next five years.
The reports of an Altria-Cronos deal only occurred earlier this week. Altria’s decision to continue with an investment in Cronos shows that Altria is serious about investing in marijuana as a new growth area, as the sale of traditional cigarettes slowly.
Altria’s stock exchange has fallen almost 25% this year and the company is expected to report revenue growth of only about 1% this year and 2019.
“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria, says Howard Willard, Altrias CEO, in a statement.
Altria shares increased 2% at the start of trading day Friday while Cronos (CRON) increased more than 30% “
” Altria is the perfect partner for Cronos Group, providing the resources and expertise we need to significantly accelerate our strategic growth, “says Mike Gorenstein, CEO of Crono.
Gorenstein added that Cronos will use the investment from Altria to expand its distribution and infrastructure around the world and also increase its research and development investment for new brands and products.
Cronos and other cannabis stocks have been driven in the limelight in recent months following the legalization of recreational marijuana in Canada in October as well as legalized recreational and medical pot in several US states last month.
With Democrats who gain control of US homes, Congress can finally pass Farm Bill, which would make it legal to produce hemp and possibly open the door for more products containing cannabidiol or CBD.
Many alcoholic beverages, tobacco and other consumer products companies may want to invest in cannabis.
Canadian Canoey Growth (CGC) has already received an investment in several billion dollars from Corona owner Constellation Brands (STZ).
Coca-Cola (KO) was told to consider an investment in Canadian cannabis company Aurora (ACB).
But coke shot down the call in October. CEO James Quincey said the company “has no plans at this stage” to enter the CBD market.
Coke Archrival Pepsi (PEP) has not completely ruled out a move in cannabis. Finance director Hugh Johnston told analysts in his October earnings that “it’s fair to say we’re looking at everything” in response to a cannabis issue.
The Canadian subsidiary of Molson Coors (TAP) has a joint venture with The Hydropothecary Corporation to produce cannabis-infused drinks for the Canadian market. Lagunitas, a beer brand owned by Heineken (HEINY), sells a cannabis-infused sparkling watermark in California.
Investors seem to bet that more offers could come. Shares of Canopy, Aurora, Tilray (TLRY) and Aphria (APHA) rose everyone on Friday morning.