Big news this morning – and I hope you’re hearing it from me first.
As I’ve been predicting since I first started covering the field in late 2016, Big Tobacco is diving head first into legal cannabis.
Altria Group Inc. (NYSE:MO), maker of Marlboro cigarettes and other major brands, said early today that it’s taking a $1.8 billion, 45% equity stake in Canadian cannabis leader Cronos Group Inc. (Nasdaq:CRON). Plus, Altria has the option to take over Cronos through 55% ownership over the next four years.
The “bigness” of this news is evident in the price Altria paid: $12.14 per share – an 18% premium over Cronos’ stock price as of Thursday, and approaching the stock’s all-time high of $15.30.
And it’s evident in how Cronos absolutely skyrocketed on the news. As I write this, the Toronto-based firm’s stock is already up more than 25% for the day.
Altria’s dive into pot makes sense, of course. Its long-running global experience in the highly regulated tobacco industry is going to come in handy for an internationally oriented cannabis firm like Cronos, which has operations not just in Canada, but also in Colombia, Germany, Poland, Israel and Australia.
And Cronos should supply a nice shot-in-the-arm for Altria, which, like all tobacco firms, has been hit hard by public health laws and anti-tobacco campaigns. It no doubt hopes the Cronos deal will help turn the tide.
As for what happens from here – to Cronos and the rest of the legal cannabis industry we follow so closely here – no one can say for sure.