Altria buys 45% stake in cannabis producer Cronos for $2.4 billion

Altria buys 45% stake in cannabis producer Cronos for $2.4 billion

Altria buys 45% stake in cannabis producer Cronos for $2.4 billion

"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".

As part of the agreement, Altria will be able to nominate four members to Cronos Group's board of directors. The stock closed at $17.06, up 22 per cent.

The transaction is expected to close in the first half of next year.

Altria's stock fell by almost 25 percent this year and revenue is expected to grow by only 1 percent this year and in 2019, CNN Business reported.

Cronos and other cannabis stocks have been thrust into the spotlight in the past few months following the legalization of recreational marijuana in Canada in October, as well as legalized recreational and medical pot in several U.S. states last month.

Willard called Canada a trailblazer in the cannabis space.

More news: Microsoft briefly toppled Apple as the most valuable company in the world

Altria's investment marks the latest move by a USA company in an established industry to tap the burgeoning Canadian cannabis industry.

Philip Morris International CEO Andre' Calantzopoulos discusses why his company is keeping clear of the cannabis industry. Aurora Cannabis Inc. rose as much as 11 percent, Canopy Growth Corp. climbed 7.3 percent and Tilray Inc. gained 5.5 percent.

The August investment by Constellation, which makes Corona and other beverages, was the largest to date by a major US corporation in the cannabis market. Canopy Growth received a multibillion-dollar investment from Corona owner Constellation Brands in August, CNN Business reported. 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. A wave of cannabis producers have set up shop in Canada, where recreational use was legalised earlier this year.

"Altria expects its investment to help Cronos Group accelerate its growth strategies and its R&D; and intellectual property development", according to the statement.

With the Cronos deal, Altria will get a new opportunity to boost revenue as cigarette smoking continues to decline in the United States.

Related news