Today, Altria announced that it had agreed to invest $1.8 billion (2.4 billion Canadian dollars) in Cronos Group to support its innovation and distribution footprint. The transaction will give Altria a 45% stake in Cronos Group at a price of 16.25 Canadian dollars per share. The agreement also allows Altria to increase its stake by an additional 10% over the next four years with the excise of the warrant at a price of 19.00 Canadian dollars per share.
According to the agreement, Altria can nominate four directors to Cronos Group’s seven-member board, including one independent board member. Along with supporting Cronos Group’s innovations, the deal is expected to aid Cronos Group in utilizing Altria’s expertise in handling regulatory affairs and brand management.
In a statement, Altria’s chair and CEO, Howard Willard, stated, “Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria. We believe that Cronos Group’s excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential.”
The agreement appears to have increased investors’ excitement, as Altria was trading 2.6% higher in premarket hours on December 7.
Year-to-date stock performance
Increased anti-tobacco regulations and the declining smoking population have been putting pressure on tobacco companies’ stock prices in 2018. Year-to-date, Altria stock has fallen 23.8% as of December 6. In comparison, the stock prices of its peers Philip Morris International (PM) and British American Tobacco (BTI) have fallen 19.3% and 48.5%, respectively, in the same period.