Altria Group said Friday the idea agreed to buy a 45 percent stake in leading cannabinoid company Cronos Group for about $1.8 billion, a sign of the completely new world in which Altria must compete.
Altria can be also weighing an investment in e-cigarette company Juul, CNBC has reported. Those talks could be completed as soon as soon as later This kind of month, a person familiar with the situation tells CNBC.
Sales of cigarettes have slowed along with its customers have either turned to some other recreational products — like cannabis along with e-cigarettes — or are threatening to do so from the future. Those industries, though, are in need of expertise to navigate regulatory hurdles along with capital to invest in their company.
Talks between Cronos along with Altria have been ongoing for more than a month, people familiar with the situation told CNBC. Altria can be one of several parties with which Cronos considered partnering , the people added.
The minority deal allows Cronos the flexibility to take investments via some other companies such as, for example, a big food company, the people said. There can be no certainty which Cronos could strike such a deal. As part of the deal, Altria features a warrant which could allow the idea to boost its stake in Cronos to about 55 percent at a cost of $19 per share.
As part of the agreement, Altria will be able to name four directors to Cronos board, including one independent director. These additions will boost the size of Cronos’ board to seven via several directors.
The company also announced plans to discontinue its MarkTen along with Green Smoke e-cigarette products along with its Verve oral nicotine, citing the financial performance of these products combined with heightened regulatory restrictions for its decision.
Altria said the idea plans to refocus its resources on more compelling reduced-risk tobacco product opportunities.
In connection with these steps, Altria expects to record a one-time pretax charge of about $0 million from the fourth quarter. Most of the charge will be a non-cash asset impairment charge, along with will be excluded via the company’s adjusted earnings.
In premarket trading, Cronos shares were up nearly 36 percent on the news, while Altria shares gain 2 percent.