Altria Becomes Largest Shareholder in Cronos Group, A Leading Global Cannabinoid Company

VIRGINIA: Altria announced the completion of its approximately USD $1.8 billion (CAD $2.4 billion) investment in Cronos Group, a leading global cannabinoid company, following receipt of shareholder and Canadian regulatory approvals.

Altria’s investment represents an approximate 45% economic and voting interest in Cronos Group with a warrant to acquire additional ownership at a price of CAD $19.00 per share, exercisable over the next four years. If exercised in full today, the warrant would increase Altria’s ownership in Cronos Group to approximately 55%. The aggregate exercise price for the warrant is approximately USD $1.0 billion (CAD $1.4 billion).

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Under the terms of the transaction, Altria nominated four directors who were recently elected to serve on Cronos Group’s seven member board: Kevin C. Crosthwaite, Jr., Murray R. Garnick, Bruce A. Gates and Bronwen Evans.

“We’re excited to finalize our investment in Cronos Group and to support their talented team,” said Howard Willard, Altria’s Chairman and Chief Executive Officer. “Cronos Group is our exclusive partner in the emerging global cannabis category and represents an exciting new growth opportunity for Altria.”

“We are delighted to close this transaction and kick-off a relationship that we expect to lead to significant growth and value creation,” said Mike Gorenstein, Cronos Group’s Chairman, President and Chief Executive Officer. “Altria’s investment and the services they will provide to Cronos Group will enhance our financial resources and allow us to expand our product development and commercialization capabilities and regulatory expertise to better position Cronos Group to compete, scale and lead the rapidly growing global cannabis industry. We look forward to the many opportunities we expect this relationship to create.”

 

 

Altria to Make Growth Investment In Cronos Group

Altria to Invest USD $1.8 Billion (CAD $2.4 Billion) for 45% Ownership Interest in Leading Global Cannabinoid Company with Warrant to Increase Ownership to 55% Over Next 4 Years

VIRGINIA: Altria Group today announced that it has entered into an agreement to acquire newly issued shares in Cronos Group, a leading global cannabinoid company, headquartered in Toronto, Canada. The transaction represents a 45% equity stake in Cronos Group, at a price of CAD $16.25 per share, for an aggregate investment by Altria of approximately USD $1.8 billion (approximately CAD $2.4 billion).

As part of the agreement, at closing, Altria will have the right to nominate four directors, including one independent director, to serve on Cronos Group’s Board of Directors, which will be expanded from five to seven directors. The agreement includes a warrant to acquire an additional ownership interest in Cronos Group at a price of CAD $19.00 per share exercisable over four years from the closing date. If exercised in full, the warrant would increase Altria’s ownership in Cronos Group by 10% to approximately 55%.

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“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, Altria’s Chairman and Chief Executive Officer. “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.”

“Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said Mike Gorenstein, Cronos Group’s Chairman, President and Chief Executive Officer. “The proceeds from Altria’s investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D and brands that resonate with our consumers. Importantly, Altria shares our vision of driving long-term value through innovation, and we look forward to continuing to differentiate Cronos Group in this area.”

This investment positions Altria to participate in the emerging global cannabis sector, which it believes is poised for rapid growth over the next decade. It also creates a new growth opportunity in an adjacent category that is complementary to Altria’s core tobacco businesses.

Altria expects its investment to help Cronos Group accelerate its growth strategies and its R&D and intellectual property development. Additionally, Altria will provide expertise to help Cronos Group thrive in the growing global cannabis market. These services may include regulatory affairs, regulatory science, compliance, government affairs and brand management.

Big Business Starting To Look At Canada’s Newest Industry

UNITED KINGDOM: Twenty years ago, it was vilified as a ‘gateway drug’. Now, cannabis has grown into a big business, with the potential to become even bigger as laws are scheduled to change to reflect shifting social attitudes towards marijuana and investment picks up to take advantage of increased demand.

And make no mistake: the demand is huge. In the United States, the legal cannabis industry is worth $6.7 billion, according to Bloomberg.  Actively watching the industry include: Altria Group (NYSE: MO), Insys Therapeutics (NASDAQ: INSY), GW Pharmaceuticals (NASDAQ: GWPH), Teva Pharmaceuticals (NYSE: TEVA), MedReleaf Corp (OTC: MEDFF) (TSX: LEAF.TO)

In Canada alone, cannabis is estimated to reach an $8 billion market with 150,000 people using marijuana for medical purposes. Yet estimates indicate that number could increase dramatically after pot is legalized next year: by 2021 there could be 3.6 million legal users consuming 420,000 kilograms of pot.

With the legal cannabis industry still in its infancy, the potential for growth is huge. At the moment, legal growers supply only 31,000 kilograms of Canada’s weed, or 5 percent of anticipated total medical and recreational demand. To avoid bottlenecks and keep supply coming, Canada’s pot-growing business must take off, and fast. Dozens of underground producers, who have grown illegally for years, could start supplying existing demand within a few years, if they can obtain licenses and build infrastructure.

Cannabis is virtually unique: an emerging sector tainted for years by high-risk and regulatory uncertainty, it has yet to be penetrated by tier-one capital, as institutional investors have stayed away.

Investing in cannabis can be tricky. Publicly-traded companies are scarce, most are small-cap and penny stocks, and finding those with strong prospects for growth can be challenging. The amount invested globally into cannabis ventures remains relatively small, only $220 million in 2016. Yet that’s a significant increase from investment in 2013, which was a scant $13 million.

But the opportunities for smaller investors to get in the ground floor are significant, especially when you look at what some newer firms are bringing to the table and the likelihood that larger firms, particularly those in the tobacco trade, will get in on the action as well.

Here’s a look at some companies that are getting into the cannabis game:

Philip Morris

It makes sense for a major tobacco company to be interested in cannabis. Back in the 1960s, when social interest in marijuana began to grow, rumors circulated that Big Tobacco was buying up brand names for marijuana products while considering investments in cannabis production.

A crackdown on drug use and a pushback against marijuana quashed that attempt, but with the norms changing, a few of Big Tobacco’s most prominent members are re-evaluating their interest in cannabis.

A major reason is the declining sales of cigarettes. For the last several decades Big Tobacco have focused on emerging markets as smoking faded in the developed world. But marijuana represents a lucrative new market, one which is attracting new attention from the larger tobacco firms, albeit in a slow, hesitant fashion.