Rumours had been circulating for days before Altria confirmed its interest in the Canadian firm late last Friday, announcing in a statement that it will take a 45% stake.
Under the terms of the agreement, Altria obtains a warrant that, if exercised within four years, would allow it to increase its stake in Cronos to about 55%.
In addition, Altria has been given the right to nominate four directors, including an independent, to serve on the board of directors at Cronos, which will be expanded from five to seven directors.
“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 CEO.
“We believe that Cronos Group’s excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realise its significant growth potential.”
Also commenting on the deal, Cronos Group chairman and CEO Mike Gorenstein said: “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.”
He went on to tell CNBC that Atria’s expertise with vaping products appealed to Cronos, which sees market opportunities in customising vapers for cannabis.
Meanwhile, a key advantage for Atria is that cannabis has been legalised in Canada since October, offering the tobacco giant access into a new and growing market at a time when tobacco sales are declining in the US.
And there is always the possibility that the US will follow Canada’s lead at a federal level and make it legal to produce hemp and cannabidiol products.
CNBC also reported that Altria will now discontinue its MarkTen and Green Smoke e-cigarette brands, as well as its Verve oral nicotine, and according to a source “familiar with the situation”, Altria is also considering an unspecified investment in Juul, an e-cigarette company based in San Francisco.
Sourced from Altria Group, CNBC; additional content by WARC staff