FILE- This June 14, 2018, file photo shows cartons of Marlboro cigarettes on the shelves at JR outlet in Burlington, N.C. Toronto-based cannabis producer Cronos Group says Marlboro maker Altria will invest $2.4 billion in the Canadian company. (Gerry Broome/AP Photo/File)

U.S. tobacco giant to invest $2.4B in Canadian cannabis producer

American tobacco giant Altria Group, the maker of Marlboro cigarettes, announced Friday that it will make a $2.4 billion equity investment in the Canadian cannabis producer Cronos Group.

Under the initial investment, Altria will acquire a 45 per cent ownership stake in Toronto-based Cronos, with an option to invest up to a further $1.4 billion within four years to increase its ownership stake in Cronos to 55 per cent.

Under the terms of the agreement, Altria has agreed to acquire 146.2 million Cronos shares at a price of $16.25 per share.

Virginia-based Altria, will have the right to nominate four directors, including one independent director, to serve on the board of directors of Cronos Group, according to terms announced by both companies.

“Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said in a statement Mike Gorenstein, Chairman, president and CEO of Cronos Group.

The proceeds from Altria’s investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D and brands that resonate with our consumers.”

‘Exciting growth opportunity’

FILE- This Sept. 11, 2018, file photo shows a marijuana plant in San Luis Obispo, Calif. (Richard Vogel/AP Photo/File)

Canada legalized recreational use of cannabis on October 17, 2018, becoming only the second country after Uruguay to do so on a national level.

“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said in a statement Howard Willard, Altria’s chairman and CEO.

Cronos had previously confirmed reports that it was in talks with Altria, which joins Molson Coors, Constellation Brands and other established companies that are making moves in the cannabis space.

Its shares were up 35 per cent pre-market trading Friday after the announcement, making them worth about US$14 a share (up from US$10.45 at the Thursday close on Nasdaq and C$13.98 on the Toronto Stock Exchange.

With files from The Canadian Press

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