Tobacco giant buys pot stake

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Tobacco giant buys pot stake
Tobacco giant buys pot stake

Altria, the maker of Marlboro cigarettes for the US market, is pushing into the Canadian cannabis industry. This is its first foray into the nascent pot industry.

Shares of cannabis firms gained on the news.

File photo

Altria has agreed to acquire a 45% stake, for $1.8bn (€1.6bn), in the Canadian cannabis producer Cronos and has warrants to give it the option to increase it to 55%.

The deal gives Altria a foothold in Canada, which, in October, became the first major economy to legalise marijuana for adult use on a federal level. Cronos, meanwhile, gets “product development and commercialisation capabilities, and deep regulatory expertise”, the company said.

Altria also announced it would discontinue two of its next-generation tobacco products, MarkTen and Green Smoke e-vapor products, as well as its oral nicotine-containing products, and focus on “more compelling, reduced-risk tobacco product opportunities”.

The company will record a $200m (€176m) write-down. The biggest companies have avoided investing in US cannabis businesses, which are legal in a handful of states, because of the US federal prohibition on the drug. That’s made Canada an attractive place for investors and businesses to push into the growing sector. Altria has been grappling with the steady decline of tobacco smoking rates and sees potential in marijuana’s move into the mainstream.

Chief executive, Howard Willard, said the investment is “an exciting new growth opportunity for Altria”.

Altria already has a deal to sell Philip Morris’s “heat not burn” IQOS product in the US, if it gets regulatory approval, which would give it access to a different market than that of the traditional cigarette-smoker.

As one of the largest companies in the adult consumer products sector, Altria has decades of experience in regulatory, government affairs, compliance, product development, and brand management that we expect to leverage, particularly as new markets for cannabis open around the world,” Cronos said.

Meanwhile, Altria is also said to be in talks to buy a stake in Juul, another fast-growing company threatening the traditional cigarette space.

Investors cheered the news, sending the company’s shares up as much as 2.5% at one stage.

Altria had declined around 22% this year.

– Bloomberg

Source: Business News