Altria to marry pot with big tobacco in $1.8 billion Cronos deal

Canada voted earlier this year to legalise weed. Credit PA

Shares of Altria were up 1.6 per cent at US$55.29 in early trading, while USA -listed shares of Cronos were up about 29 per cent at US$13.49.

Cannabis investors can't miss the Benzinga Cannabis Capital Conference, the No. 1 networking event for institutional capital and the leading cannabis companies. The offer represents a 16.2 per cent premium to the stock's Thursday close on the Toronto Stock Exchange.

The first Canadian cannabis grower to list its shares on a US stock market, Cronos said it plans to spend the money on product innovation, noting Altria's expertise in device technology and automation, and fuel Cronos's expansion into new countries amid a global shift toward loosening restrictions on the drug. 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.

FOX Business breaks down other companies that have eyed investments in the cannabis industry below. The new relationship represents an "exciting new growth opportunity" and Cronos is backed by an "excellent management team".

With smoking rates in the United States falling fast, Altria is under pressure to find new sources of revenue. It. It's a logical fit, because "big tobacco knows how to cultivate crop, knows how to deal with regulators, they are at the forefront of vaporization technology, and they also arguably have less reputational risk than other fast-moving consumer goods", he said.

Altria is also in talks to take a minority stake of between 20 per cent and 40 per cent in e-cigarette maker Juul Labs Inc, sources told Reuters last month.

Cronos, meanwhile, grows and sells medical and recreational cannabis in Canada, operating two growing facilities in Ontario and one in British Columbia. It also plans to focus on more reduced-risk tobacco products.

The agreement allows Altria to nominate four directors to Cronos' board of directors, including one independent director. "It's worth noting that Altria does not grow their own tobacco".

Reports of an Altria-Cronos deal first surfaced earlier this week.

"That experience, we think, is going to be very important as we try to accelerate new product categories". Canada's top lenders, who have largely refused to serve clients in the cannabis sector for years, are now getting shut out of the sector's biggest transactions. Several U.S. states have legalized cannabis for medical or recreational use, but pot remains illegal under federal law.

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