Rising High: Altria Bets On Cannabis With Cronos Stake

Altria (MO) will invest $1.8 billion in cannabis company Cronos Group (CRON), taking about a 45% stake in the company. Additionally, Altria announced plans to exit some of its e-cigarette products, including MarkTen and Green Smoke. According to a report, citing a source, the company is still considering an investment in e-cigarette company Juul.


Altria announced on Friday that it will buy a 45% stake in Cronos Group for about $1.8 billion. As part of the agreement, Altria will gain the right to nominate four directors, including one independent director, to serve on Cronos Group's board of directors, which will be expanded from to seven from five directors. The agreement also includes a warrant to acquire an additional ownership interest in Cronos. Cronos Group Chairman, President and Chief Executive Officer Mike Gorenstein said in a statement that Altria "is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth." He added that "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 in this area." On Monday, Reuters reported that Altria was in early stage talks to acquire Cronos Group as it looks to diversify business beyond traditional smokers.


 Altria also said it will discontinue its MarkTen and Green Smoke e-cigarette products and its Verve oral nicotine. In a statement, Altria cited the current and expected financial performance of these products combined with regulatory restrictions that burden Altria's ability to quickly improve these products. The company said it plans to refocus its resources on more compelling reduced-risk tobacco product opportunities. Altria expects to record a one-time pretax charge of about $200M in the fourth quarter in connection with these steps. Most of the charge will be a non-cash asset impairment charge, and will be excluded from the company's adjusted earnings, it said.

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