Marlboro owner Altria makes £1.4bn bet on cannabis

Marlboro Maker Altria Takes 45% Stake In Cronos Group

Doing so would lift Altria's status to a majority shareholder as it would own around 55 percent of the company.

The deal with Cronos gives Altria a foothold in Canada, which in October became the first major economy to legalize marijuana for adult use on a federal level.

The transaction between the two publicly traded companies represents a 45 percent equity stake in Cronos Group at a price of $16.25 (CAD) per share for an aggregate investment by Altria of approximately Dollars $1.8 billion. Cronos will remain a Canada-based company and will continue to be led by its existing management team.

The investment will give Altria a foothold in the growing world of legal cannabis alongside drinks giant Constellation Brands and distributors like Southern Glazer's, which entered the cannabis distribution market through its Great North Distributors earlier this year, and Breakthru, which formed an exclusive distribution partnership with CannTrust in September. That is a 16.2% premium over the stock's Thursday close, according to Reuters.

Cronos plans to prioritize research and development, innovation and developing brands.

"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.

"An investment of this magnitude provides overall legitimacy to the industry as a whole and should represent a positive catalyst for the sector, with the news likely to drive valuations higher (particularly considering the sector's recent pullback)", Canaccord Genuity analyst Matt Bottomley wrote in a note.

After the deal is closed, Altria will have the right to nominate four directors, including one independent, to the Cronos board.

At time of publication, Cronos Group was trading up 32 percent to $13.88 per share.

Altria will buy 146.2 million of newly issued Cronos shares at C$16.25 per share for a 45-percent stake.

The biggest companies have avoided investing in USA cannabis businesses, which are legal in a handful of states, because of the federal prohibition on the drug.

This story will be updated throughout the day.

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