Marlboro’s owner invests $1.8 billion in Canadian cannabis company

Marlboro’s owner invests $1.8 billion in Canadian cannabis company

Altria, the parent company of Philip Morris USA, which makes Marlboro cigarettes, is taking a 45 percent stake in the Toronto company. Federal data from November showed cigarette smoking among US adults reached an estimated 14 per cent in 2017, the lowest level ever.

Altria can also invest up to a further $1.4 billion to increase its ownership stake in Cronos to 55 per cent, under the arrangement.

"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.

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.

The transaction is expected to finalize within the first half of 2019.

Altria will acquire 146.2 million Cronos shares at a price of CA$16.25 per share, representing a 41.5% premium to the 10-day average price ending November 30, the last unaffected trading day before Cronos publicly disclosed discussions with Altria.

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Altria's huge investment lit up shares of cannabis companies that have begun to set up shop in Canada, where recreational use was legalized this year.

After the deal is closed, Altria will have the right to nominate four directors, including one independent, to Cronos' board comprising seven directors in total. It said the deal with Altria does not limit Cronos from any other partnerships.

Cronos shares were up 23% in pre-market trading, while Altria's stock gained 2%, according to CNBC. Constellation Brands Inc., maker of alcoholic beverages, has invested more than $5-billion for control of Canopy Growth Corp., while Molson Coors Brewing Co.is looking to create cannabis-infused beverages through a joint venture with Quebec's Hexo Corp. It also weighed making investments in other growers, such as Aphria and CannTrust Holdings Inc., according to sources familiar with the matter who were granted anonymity because the talks were private.

Separately on Friday, Altria 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 $200 million in the fourth quarter.

The cigarette giant has invested nearly $4m into the Canadian firm.

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. In 2014, Altria acquired e-cigarette startup GreenSmoke Inc for $110 million. Altria is in talks to acquire a stake in e-cigarette start-up Juul Labs Inc., according to reports by US media outlets.

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