Altria (Malboro) invests $1.8 billion in Cronos, Canadian cannabis producer

We reported in a previous article that the Altria Group, producer of the Marlboro brand, was in negotiations to acquire shares in Cronos Group, a Canadian cannabis producer. The Altria Group has now invested $1.8 billion in Cronos. It's the biggest deal ever between the two industries.

The tobacco/cannabis alliance

The tobacco industry has been in the throes of a major downturn for the past two decades or so: sales are at an all-time low. As it seeks to diversify, it is increasingly interested in the cannabis business. Indeed, what better way to diversify than into the cannabis market, which is quite similar to the cigarette market in terms of production, distribution and regulation. All the more so as this market is estimated to grow by more than 100% in the coming years.

Other tobacco companies also consider thehas created links with the cannabis industry, but previous investments have not been on this scale. Altria seals the major alliance between the two industries with the acquisition of 45%'s shares in Cronos and the possibility of becoming a majority shareholder in the future. Cronos CEO Mike Gorenstein sees the partnership as a way of making his company more attractive, and looks forward to benefiting from Altria's experience in lobbying and maneuvering regulations, important in the tobacco world. Both partners have stated their intention to focus on marketing development and intellectual property rather than plant cultivation.

Altria shares, whose price had fallen by 24% over 2018, have risen by 16% since the deal was announced. Cronos shares have risen by 33%. And they're not the only ones: other cannabis multinationals have seen their share prices rise as the market expects a domino effect. as was the case, for example, with the multinational alcohol companies. Aurora shares rose by 11%, Aphria 14%, Canopy 7.3% and Tilray 4.8%.