Tobacco giant Altira is investing $ 1.8 billion in Canadian cannabis company Cronos Group. This gives Altria a 45% stake in the company, with Altria having the option to increase its stake to 55% over the next five years.
Reports of an Altria Cronos deal first appeared earlier this week. Altria's decision to invest in Cronos shows that Altria is seriously investing in marijuana as a new growth area, as the sale of traditional cigarettes is slowing down.
Altria's share price fell nearly 25% this year, and the company expects sales growth of just 1% this year and 2019.
"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria," said Howard Willard, CEO of Altria, in a statement.
Altria (MO) shares rose 2% on Friday, while Cronos (CRON) rose more than 30%. ,
"Altria is the ideal partner for the Cronos Group, providing the resources and expertise we need to make our strategic growth meaningful," said Mike Gorenstein, CEO of Cronos.
Gorenstein added that Cronos will use the investment Altria will expand its distribution and infrastructure worldwide and invest heavily in research and development for new brands and products.
Cronos and other cannabis stocks have come into focus in recent months following the legalization of marijuana for the recovery in Canada in October, as well as the legalized recovery and medical pot in several US states over the last month in recent months.
After the Democrats gain control of the US House, Congress can finally say goodbye to Farm Bill, making hemp production legal and possibly opening the door to other products containing cannabidiol or CBD.
Many alcoholic beverage, tobacco and other consumer goods companies want to rely on cannabis.
Canadian marijuana company Canopy Growth (CGC) has already received several billion dollars in investment from Corona owner Constellation Brands (STZ).
It has been rumored that Coca-Cola (KO) should consider investing in the Canadian cannabis company Aurora (ACB).
But Coke shot off the discussion in October. CEO James Quincey said the company had "no plans at present" to enter the CBD market.
Archbishop Pepsi (PEP) of Coca-Cola can not completely rule out a move to cannabis. Hugh Johnston, chief financial officer, told analysts in October on his call for profit that it was "fair to say we're looking at everything" in response to a question about cannabis.
The Canadian subsidiary of Molson Coors (TAP) has a joint venture with The Hydropothecary Corporation producing cannabis-soaked beverages for the Canadian market. Lagunitas, a beer brand owned by Heineken (HEINY), sells a cannabis-infused soda brand in California.
Investors seem to bet there may be more deals coming. Stocks of Canopy, Aurora, Tilray (TLRY) and Aphria (APHA) all rose Friday morning.