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News Alert: Altria Makes $1.8 Billion Investment in Cannabis

December 7, 2018

Altria, the parent company of Ste. Michelle Wine Estates and Marlboro, has announced a $1.8 billion investment in Canadian cannabis company Cronos Group. The investment will give Altria a 45% stake in Cronos at C$16.25 per share. As a term of the investment, Altria will name four directors to Cronos’ board, which will expand from five to seven members.

In addition, Altria will have the right to increase its stake in the company, up to 55%, over the next four years at a price of C$19 per share. Reuters reports that the initial purchase price represents a 16.2% premium compared to the cannabis company’s stock price at closing on Thursday on the Toronto Stock Exchange.

Altria’s move will help bolster Cronos’ position in the market and give the startup access to regulatory, marketing, and government expertise as it navigates the fledgling industry. “Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said Mike Gorenstein, CEO of Cronos. “The proceeds from Altria’s investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D.”

The investment will give Altria a foothold in the growing world of legal cannabis alongside drinks giant Constellation Brands and distributors like Southern Glazer’s, which entered the cannabis distribution market through its Great North Distributors earlier this year, and Breakthru, which formed an exclusive partnership with CannTrust in September.  In August, Constellation made a $4 billion in Canopy Growth, another Canadian cannabis company.—Shane English

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