"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", Howard Willard, Altria's chairman and CEO, stated in an announcement.
The entry of Altria - owner of Marlboro maker Philip Morris USA and an investor in alcohol giant Anheuser-Busch InBev - is another major milestone for the marijuana sector, coming on the heels of Constellation Brands' bombshell investment in Canopy Growth in August. "This is just another stamp of approval that there is a huge opportunity in cannabis and that it is a legitimate industry". It's a logical fit, because "big tobacco knows how to cultivate crop, knows how to deal with regulators, they are at the forefront of vaporization technology, and they also arguably have less reputational risk than other fast-moving consumer goods", he said.
After the news was announced shares of Cronos Group Inc. jumped 31 per cent and neared an all-time high at the opening bell on Friday.
The agreement includes a warrant to acquire additional shares over the next four years that could give the Altria, which is based in Richmond, Virginia, a 55 per cent ownership stake in the Toronto company.
The transaction is expected to close in the first half of next year. Cronos will remain a Canada-based company and will continue to be led by its existing management team.
Coca-Cola CEO James Quincey said last October that the company did not have any plans to develop a CBD-infused drink in the near future.
Cronos said it will use the capital to accelerate its global growth and expansion, as well as research and development. But Cronos is not among Canada's largest cannabis producers - it generated just $3.8-million in revenue in its most recent quarter.
"We'll work with them on genetics, technical assistance, taking back the product and ultimately processing it, formulating it, branding it and distributing it", he said.
"We believe an investment of this magnitude provides overall legitimacy to the industry as a whole and should represent a positive catalyst for the sector", he said.
Tobacco giant Altria (MO) is jumping on the cannabis bandwagon.
The August investment by Constellation, which makes Corona and other beverages, was the largest to date by a major US corporation in the cannabis market.
In February, Pyxus bought controlling stakes in two Canadian marijuana producers, Canada's Island Garden and Goldleaf Pharm.
Coca-Cola (KO) was rumored to be considering an investment in Canadian cannabis company Aurora (ACB).
Shares of Cronos surged as much as 33 per cent to $18.56 on the Toronto Stock Exchange from its $13.98 closing price on Thursday.