Altria Pays $1.8 Billion for Control of Marijuana Stock Cronos

For Cronos the Altria tie-up will provide deep regulatory expertise

For Cronos the Altria tie-up will provide deep regulatory expertise

The deal will expand Cronos' board from five to seven seats, with Altria getting a total of four of them.

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"Altria expects its investment to help Cronos Group accelerate its growth strategies and its R&D; and intellectual property development", according to the statement.

When Canada legalized recreational marijuana in October, it emerged as the world leader in the industry - and USA companies are scrambling to get in on the action.

The first Canadian cannabis grower to list its shares on a US stock market, Cronos said it plans to spend the money on product innovation, noting Altria's expertise in device technology and automation, and fuel Cronos's expansion into new countries amid a global shift toward loosening restrictions on the drug.

Canopy has said it will not sell marijuana products in the US until pot is legalized at both the federal and state level. On Tuesday, ultra-conservative Utah became the latest state to legalize marijuana use for medical purposes. It said it was doing so because it doesn't "see a path to leadership with these particular products", as well as the regulatory burden it faces to bring them to market. Peers in the marijuana sector also gained, with Aurora Cannabis Inc. rising as much as 11 percent, Aphria Inc. adding 14 percent, Canopy Growth Corp. rising 7.3 percent and Tilray Inc. gaining 4.8 percent.

The deal is expected to close in the first half of 2019.

Major pot stocks have generally pulled back from their highs in recent weeks amid reports of supply shortages and complications with the sales process under the new regime. The Altria-Cronos deal is "encouraging" given the broad potential uses for cannabis such as in pharmaceuticals and health and wellness products, she said in a note to clients. 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. US exchanges have begun listing those companies as well.

Meanwhile, Molson Coors launched a joint venture called Truss with Quebec-based cannabis producer Hexo October.

Cronos confirmed last Friday that it was in talks with Altria after a Reuters report. Altria's offer of C$16.25 a share represents a 16 percent premium from Thursday's closing price. It said the deal with Altria does not limit Cronos from any other partnerships.

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.

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