Marlboro cigarette parent buying major stake in marijuana company

Mike Gorenstein marijuana firm Cronos Group's founder and CEO speaks during an interview in New York U.S

Mike Gorenstein marijuana firm Cronos Group's founder and CEO speaks during an interview in New York U.S

The entry of Altria - owner of Marlboro maker Philip Morris USA and an investor in alcohol giant Anheuser-Busch InBev - is another major milestone for the marijuana sector, coming on the heels of Constellation Brands' bombshell investment in Canopy Growth in August.

Separately Altria also said it would discontinue some of its e-cigarette brands, including all of MarkTen and Green Smoke e-vaper products, based on their financial performance and will take a related pretax charge of US$200 million in the fourth quarter.

The deal is a "big endorsement" for Cronos and is "reassuring" for the industry, amid rising concerns that pot companies' valuations may be too lofty, Landry said.

It's clear Altria has reassessed its competitive position.

Cronos plans to focus on cannabis genetics, innovation and branding, while contracting with farmers to grow the product and working with retailers.

Altria shares rose as much as 3.2 percent to $56.14 on Friday.

Cronos shares, meanwhile, surged as much as 33 percent to $13.95 in NY. That is a 16.2% premium over the stock's Thursday close, according to Reuters. Pot producer Canopy Growth Corp.'s shares in Toronto were up over two per cent in afternoon trading.

As part of the agreement, Altria will be able to nominate four members to Cronos Group's board of directors.

The cigarette giant has invested nearly $4m into the Canadian firm.

"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", Howard Willard, Altria's chairman and CEO, stated in an announcement.

"We believe an investment of this magnitude provides overall legitimacy to the industry as a whole and should represent a positive catalyst for the sector", he said. The most attractive piece of the partnership is Altria's experience dealing with regulatory agencies, he said.

Altria now has been grappling with a Food and Drug Administration that's intent on strengthening restrictions on some of the vaping products that have caught on with younger users. For its cash, the seller of cigarette brands such as Marlboro will get a 45% stake in Cronos and a majority of the seats on the.

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". "It's worth noting that Altria does not grow their own tobacco". We think that model of growing your own plants is very hard to scale and to execute well.

Latest News