Altria buys 45 percent stake in Canadian marijuana company

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The cigarette maker's move follows modest investments in the cannabis sector in the past year by tobacco companies Imperial Brands and Pyxus International, formerly Alliance One International.

Altria's stock has fallen almost 25% this year and the company is expected to report revenue growth of only about 1% this year and in 2019.

In June, London-based tobacco company Imperial Brands Plc took an undisclosed stake in closely held Oxford Cannabinoid.

That will give Altria a 45% ownership interest in Cronos.

Cronos CEO Mike Gorenstein said the partnership with Altria doesn't limit the cannabis firm from engaging with other strategic partners.

Altria's bet on Cronos could also prompt more similar deals in the sector, he added.

"I think it shows that the US players - Altria and Constellation - will not buy into a USA cannabis company until it becomes federally legal in the US", said Mr.

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Major pot stocks have generally pulled back from their highs in recent weeks amid reports of supply shortages and complications with the sales process under the new regime. Constellation brands said at the time that the deal would "position Canopy Growth as the global leader in cannabis production, branding, intellectual property and retailing". As part of the deal, Constellation also received new warrants which, if exercised along with its existing warrants, would increase its ownership in Canopy beyond 50 per cent.

Altria got a good deal, particularly as Cronos is one of a dwindling number of licensed cannabis producers that haven't already established an exclusive relationship with a consumer products company, he said.

As well, US tobacco leaf merchant Alliance One International said its subsidiary acquired a 75 per cent equity stake in Charlottetown-based Canada's Island Garden in January.

Shares of Altria (MO) rose 2% in early trading Friday while Cronos (CRON) soared more than 30%.

Meanwhile, Molson Coors launched a joint venture called Truss with Quebec-based cannabis producer Hexo Corp.in October. Secondly, Altria's decision to enter this space via a rather sizable equity investment should go a long way toward legitimizing this emerging industry in the eyes of both retail and institutional investors moving forward.

Separately Altria also said it would discontinue some of its e-cigarette brands, including all of MarkTen and Green Smoke e-vaper products, based on their financial performance and will take a related pretax charge of US$200 million in the fourth quarter. Altria shares that vision, Mr. Gorenstein said.

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