Market Overview

Marlboro Maker Altria Takes 45% Stake In Cronos Group

Share:
Marlboro Maker Altria Takes 45% Stake In Cronos Group

Shares of Cronos Group Inc (NASDAQ: CRON) soared 25 percent Friday morning after the Canada-based cannabis company confirmed it received a C$2.4 billion ($1.8 billion) investment from cigarette company Altria Group Inc (NYSE: MO).

Rumors of a potential acquisition between the two companies were reported earlier this week.

What Happened

As part of a strategic investment, Altria will acquire a 45-percent equity stake in Cronos at a price of C$16.25 with a warrant to buy incremental shares at a price of C$19 per share which can be exercised over four years from the transaction closing date. Doing so would lift Altria's status to a majority shareholder as it would own around 55 percent of the company.

The agreement allows Altria to nominate four directors to Cronos' board of directors, including one independent director.

Cannabis investors can't miss the Benzinga Cannabis Capital Conference, the No. 1 networking event for institutional capital and the leading cannabis companies. Secure your tickets before they run out here.

Why It's Important

Altria's Chairman and CEO Howard Willard said Cronos will serve as the company's exclusive partner in the global cannabis category. The new relationship represents an "exciting new growth opportunity" and Cronos is backed by an "excellent management team."

Cronos Chairman and CEO Mike Gorenstein said Altria is an ideal partner as it can offer the "resources and expertise we need to meaningfully accelerate our strategic growth."

What's Next

Cronos will use the proceeds to more quickly expand its global infrastructure and distribution footprint while also increasing investments in R&D and brands. The transaction is expected to close in the first half of 2019. Cronos will remain a Canada-based company and will continue to be led by its existing management team.

At time of publication, Cronos Group was trading up 32 percent to $13.88 per share. Altria shares were up about 2.5 percent.

Related Links:

Better Late Than Never: How The Tobacco Industry Could Benefit From Pot

Analysts: Altria And Cronos Make A Good Team

Posted-In: Canada cigarettes Howard WillardCannabis News M&A Top Stories Markets Best of Benzinga

 

Related Articles (MO + CRON)

View Comments and Join the Discussion!

Cushing Enters ETF Space With MLP-Related Sector Funds

The Daily Biotech Pulse: FDA Nod For Roche, Bristol-Myers Hikes Dividend, 2 Biotechs To Debut