It’s incredible how fast the marijuana industry is growing— if you didn’t think that’s true then wait until legalization spreads across continents and see how many more merger possibilities like the Altria–Cronos deal will hit business headlines.
Altria, the world-known Marlboro cigarette maker, is discussing a possible acquisition of the Canada-based cannabis manufacturer Cronos in a move to broaden its horizons from traditional smokers.
Canada as an embodiment
The spotlight on Cronos came after last Tuesday’s New York Nasdaq exchange where the cannabis producer’s shares went up over 6 percent pushing its market value to around $2bn (£1.6bn).
Canada is beginning to realize the potential of the cannabis sector just within the year of legalization as the country now stands as a testing ground for Marijuana companies hoping to reach out to the international market as other nations get onboard.
The Status Quo
Cronos: we haven’t reached an agreement about a deal, and there’s no assurance the talks will result in an investment or any other kind of transaction between Altria and Cronos.
Altria hasn’t commented on the takeover.
What a takeover would mean
An Altria-Cronos buyout would mean one of the most significant mergers between mainstream tobacco and the promising marijuana sector, which has raised concerns among big consumer companies that are observing the industry for any disruptive threats as well as the possibility of faster-growing practices.
Here are other deals this year that prove all eyes are now on the marijuana industry.
June: Imperial Brands, a leading London-based tobacco producer took an unrevealed stake in Oxford Cannabinoid.
August: Constellation Brands publicized a $3.8 billion stock in Canopy Growth.
September: Coca-Cola said it was searching the space for partners interested in developing cannabinoid oil-based products.
Why Altria is searching for greener pastures
Altria’s shares have been going downhill over 20 percent throughout 2018 due to the reducing rates of cigarette smoking in the US. National data showed approximately 14 percent of adults in America smoked cigarettes in 2017. This figure was the lowest ever recorded.
Altria had in recent years invested in the e-cig sector through its Nu Mark subsidiary. And recently, sources reported that it is discussing a 20-40% minority stake in Juul Labs, the renowned e-cigarette maker.
Hopefully, Altria and Cronos will come to an understanding and strike a deal. If they do, it will be for the benefit of both parties, but most importantly, for the cannabis sector.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by using cannabis business loans solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.