On December 3, we reported that Altria was rumored to be in talks to acquire Cronos Group (CRON). Following the announcement, Cronos Group shares surged nearly 11.2% during the regular trading session and jumped another 8.7% in after-market trading hours, while Altria (MO) rose ~1.6% during the regular trading session but was nearly flat in after-market trading hours.
The next catalyst for growth
With the arrival of Canadian recreational cannabis legalization, each day we’ve been inundated with news on acquisitions and partnerships within the cannabis industry as well as among players in more established mature adjacent industries such as medicine, alcoholic beverages, and now tobacco.
Cronos Group is a licensed producer that has built capacity and continues to do so. As the cannabis space has increasingly become crowded, including companies such as Canopy Growth (WEED), Aurora Cannabis (ACBFF), and Tilray (TLRY), companies such as Cronos Group would greatly benefit from a company such as Altria, which has almost $1.2 billion on its balance sheet as of 2017.
The chart above shows how the likelihood of tobacco use among teens has declined while cannabis use has risen over the past 25 years—a sign of trouble for Altria, which has a portfolio that largely centers around tobacco products. Thus, cannabis (MJ) makes a perfect fit for tobacco companies that have deep pockets and a desire to jump on the cannabis bandwagon.