A look at where companies stand on marijuana business

Daniel Fowler
December 8, 2018

The country has largely been celebrating ever since, but in an unexpected step one of the biggest cigarette firms in the world has announced that it is pumping an incredible CAN $3.8 billion (US $2.9bn / £2.2bn) into the cannabis market.

Altria has agreed to take a 45 percent stake in Toronto-based marijuana producer Cronos Group Inc., marking a major tobacco company's first foray into cannabis. Federal data from November showed cigarette smoking among USA adults reached an estimated 14 per cent in 2017, the lowest level ever.

Cronos said Friday that the Richmond, Virginia, tobacco company will pay another $1.4 billion for warrants that if exercised, would give Altria a 55 percent majority ownership stake. Cronos now finds itself among a small pool of well-capitalized cannabis companies that can expand its offerings more effectively in Canada, internationally and, once it becomes federally legal, the United States.

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.

- There are a handful of companies listed on the Toronto Stock Exchange devoted exclusively to cannabis, either for medicinal or recreational use, or both: Canopy Growth Corp., Aurora Cannabis Inc. and Cronos Group Inc.

As part of the agreement, Altria will have the right to nominate four directors to the Cronos board, which will be expanded to seven members from five. The most attractive piece of the partnership is Altria's experience dealing with regulatory agencies, he said.

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The Marlboro maker's $2.4 billion bet on Cronos is by far the largest move by Big Tobacco into cannabis, and bodes well for the overall sector, said Martin Landry, an analyst with GMP Securities. 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.

In August, alcohol giant Constellation Brands said it would invest an additional $5 billion in Canadian pot producer Canopy Growth Corp., increasing its stake to 38 per cent.

The Denver-based brewing company said earlier this year that its Canadian unit would partner with the Hydropothecary Corporation "to pursue opportunities to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalization".

With smoking rates in the U.S. falling fast, Altria is under pressure to find new sources of revenue. It.

The cigarette giant has invested nearly $4m into the Canadian firm. "We think that that model of growing your own plants is very hard to scale and execute well". In 2014, Altria acquired e-cigarette startup GreenSmoke Inc for $110 million.

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