Marlboro maker Altria buys big stake in Canadian marijuana company

CanadaIndustryMarlboro Maker Investing $2.4 Billion in Canadian Cannabis Producer Cronos Leafly Canada Staff

Marlboro cigarette maker Altria on Friday became the latest major company to explore an entry into the legal cannabis market as more states approve the once-taboo substance for medical or recreational use.

Altria, the parent company of Philip Morris USA, which makes Marlboro cigarettes, is taking a 45 percent stake in the Toronto company. The deal also includes warrants to acquire additional ownership interest in Cronos at a price of C$19 per share over the next four years, which could raise Altria's stake to 55 per cent.

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

"Altria brings scale, expertise and complimentary capabilities. that we believe will enable us to expand the scope and enhance the scale of our company", said Mike Gorenstein, chairman, president and chief executive officer of Cronos on a call with analysts Friday. The company could also be positioning itself for the possible legalization of marijuana across the U.S., Quartz added.

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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.

Tobacco giant Altria (MO) is jumping on the cannabis bandwagon. That is a 16.2% premium over the stock's Thursday close, according to Reuters. Constellation Brands Inc announced a $3.8-billion investment in Canopy Growth Corp in August, while Coca-Cola Co said in September it was watching the space for alliances that could potentially help it develop products containing cannabinoid oil.

An investment from Altria is expected to provide Cronos Group an opportunity for growth and expansion. It said the deal with Altria does not limit Cronos from any other partnerships.

With the Cronos investment, Altria will get a new opportunity to boost revenue as cigarette smoking continues to decline in the United States.