9:37 AM, Dec 7, 2018 — Altria Group (MO), whose subsidiaries include Philip Morris USA and Ste. Michelle Wines, said Friday it will acquire a 45% equity stake in cannabinoid company Cronos Group (CRON) valued at about $1.8 billion.
The investment gets Altria’s foot in the door of the “emerging” global cannabis sector, which it believes will grow rapidly in the next decade, and creates new growth opportunities in a category adjacent to its core tobacco business, the company said.
Under the terms of the deal, Altria will acquire the stake at a price of C$16.25 ($12.22) a share. Altria will have the right to nominate four directors, including an independent director, to serve on Cronos’ board, which will grow from five to seven directors. Altria will have a warrant to acquire additional ownership at a price of C$19 a share, exercisable over four years from the closing date of the stake acquisition, the company said in a statement.
If fully exercised, the warrant would increase Altria’s ownership in Cronos to 55%, the statement said.
“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 chief executive, said in the statement. “We believe that Cronos Group’s excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential.”
Mike Gorenstein, the CEO of Cronos, said the proceeds from the equity acquisition will enable the company to accelerate its global infrastructure and distribution footprint and increase research and development.
Cronos is the owner of Canadian-licensed producers Peace Naturals Project and Original BC, based in the Okanagan Valley of British Columbia. It operates a global medicinal cannabis brand and two recreational brands in Canada. It has production and distribution platforms on five continents, the company said.
It has no operations in the US as cannabis is still federally illegal, although through Cronos, Altria is “better positioned” should the federal government decriminalize cannabis.
Companies: Altria Group
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