Cannabis Company Cronos Receives Investments from Tobacco Powerhouse Altria
According to a recent press release, Tobacco powerhouse Altria has invested $1.8 billion in Canadian cannabis company Cronos Group. According to the contract, the parent company of the Marlboro cigarette brand will gain a 45 percent ownership stake in Cronos. After news of the deal was made public, shares in Cronos Group rose to more than 30 percent, and Altria rose 2 percent in recent stoke markets.
According to the chairman and chief executive officer of Altria, Howard Willard, the company will be benefiting from the new markets which resulted from the legalization of cannabis.
Willard said that investing in Cronos Group as their exclusive associate in the growing national cannabis classification signifies a prosperous new growth opportunity for Altria. Willard also believes that the experienced management team at Cronos Group has established capabilities which are needed to compete globally, and Altria also seeks to help Cronos Group realize its significant potential for growth.
According to Mike Gorenstein who is the chairman, president, and chief executive officer at Cronos Group, the valuable assets at Altria will be necessary for the growth of Cronos Group into cannabis markets around the world.
Gorenstein said that Altria is the suitable associate for Cronos Group, offering the funds and experience needed to facilitate the strategic growth for Cronos Group significantly. He added that the proceeds from Altria’s investment would permit them to increase their worldwide foundation and distribution footprint further, and at the same time expanding investments in R&D and brands that resound with their consumers. Interestingly, Altria shares their vision of increasing long-term value through renovation, and they seek to differentiate the Cronos Group in this area consistently.
To finalize the procedure, Altria is going to pay billions for newly declared stock which represents a 45 percent share of the company. The percentage involves a 41.5 percent premium on the average price during ten days before a final agreement between the two companies was declared. The deal also deals with an option for Altria to buy more shares during four years to expand its ownership stake to 55 percent.
Furthermore, Altria will have the permission to appoint four directors to the Cronos board, including one independent director. The total amount of directors on the Cronos board will be expanded from five to seven.
Recent agreements between Altria and Cronos Group made the shares of Cronos Group to rise to about 30 percent before trading was temporarily stopped. However, when trading resumed, the stock still rose to 12 percent.
Due to the continually declining sales of cigarettes in the USA and many different nations, companies dealing with tobacco are seeking new markets to invest in. Moreover, it has been rumored that Altria has plans on spending in the manufacturer of electronic cigarette Juul and various Canadian cannabis company Apria. Also, during the past months, Imperial Tobacco in the United Kingdom stated that it was joining with Snoop Dogg’s venture capital firm Casa Verde Capital to invest in Oxford Cannabinoid Technologies.