The cannabis industry announced a groundbreaking $1.7 billion megadeal with big tobacco that has the sector on the upswing last week.
Marlboro maker Altria Group (MO), one of the largest tobacco companies in the world, announced a $1.7 billion investment in Cronos Group (CRON), one of Canada’s largest cannabis companies.
Here are some more details from Bloomberg.
Altria has agreed to take a 45 percent stake in Toronto-based marijuana producer Cronos Group Inc., marking a major tobacco company’s first foray into cannabis. It has the option to take majority control in the future.
With U.S. smoking rates falling fast, Richmond, Virginia-based Altria is under pressure to find new avenues to expand. Marijuana is now allowed in an increasing number of states but is still illegal on the federal level in the U.S. That makes Canada, which legalized recreational use in October, a large laboratory for the nascent industry.
“We believe cannabis is an excellent strategic fit for tobacco,” Jefferies analyst Owen Bennett said in a research note earlier this week. 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.
The good news gave Cronos a nice boost – shares jumped 25% and settled just shy of the 52-week high. Continue reading "Marlboro Maker Invests $1.7 Billion in Cannabis"