Marlboro cigarette maker Altria Group has purchased a 45 percent stake in Cronos for approximately $1.8 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 C$19 ($14) 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 percent to approximately 55 percent.
The deal represents by far the biggest investment by a major tobacco conglomerate in a cannabis company. It’s the second-biggest deal in the history of the cannabis industry, trailing only Constellation Brands’ $4 billion investment in Canopy Growth.
“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,” said Mike Gorenstein, Cronos Group CEO.
With the Cronos investment, Altria will get a new opportunity to boost revenue as cigarette smoking continues to decline in the United States, Reuters reported. Federal data from November showed cigarette smoking among U.S. adults reached an estimated 14 percent in 2017, the lowest level ever.