Pot Sector Regains Its Mojo After Altria's $1.8 Billion Deal

Pot Sector Regains Its Mojo After Altria's $1.8 Billion Deal

— In August, New York-based Constellation Brands announced a $4 billion investment in another Canadian pot producer, Canopy Growth Corp., the largest to date by a major US corporation in the cannabis market.

"When you look at the commitment that Altria makes, they're obviously looking at the sector for the next 10 to 20 years".

Altria can also invest up to a further $1.4 billion within four years that would increase its ownership stake in the Toronto-based pot producer to 55 per cent under the arrangement.

Cronos surpassed Aphria's market value for the first time this week and is now more than C$1 billion larger than its competitor.

Cronos Chairman and CEO Mike Gorenstein said Altria is an ideal partner as it can offer the "resources and expertise we need to meaningfully accelerate our strategic growth". The company could also be positioning itself for the possible legalization of marijuana across the U.S., Quartz added.

Philip Morris International CEO Andre' Calantzopoulos discusses why his company is keeping clear of the cannabis industry.

Canadian marijuana company Canopy Growth (CGC) already has received a multibillion dollar investment from Corona owner Constellation Brands (STZ).

As well, USA tobacco leaf merchant Alliance One International said its subsidiary acquired a 75 per cent equity stake in Charlottetown-based Canada's Island Garden in January. Constellation Brands Inc announced a $3.8-billion investment in Canopy Growth Corp in August, while Coca-Cola Co said in September it was watching the space for alliances that could potentially help it develop products containing cannabinoid oil. Molson Coors Canada owns a 57.5 percent interest in the joint venture. Altria has agreed to buy 146.2 million shares at closing at a price of C$16.25 per share. The decision by Altria to go ahead with an investment in Cronos shows that Altria is serious about investing in marijuana as a new growth area as sales of traditional cigarettes slow.

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

Related Articles