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Tobacco giant Altria makes massive bet on cannabis

Heidi Chung

Tobacco giant Altria (MO) is jumping on the cannabis bandwagon.

The company announced a $1.8 billion (C$2.4 billion) investment in cannabis company Cronos Group (CRON). Altria has agreed to buy 146.2 million shares at closing at a price of C$16.25 per share. This investment by Altria would represent a 45% equity stake in Cronos with warrant to increase ownership to 55% over the next four years.

“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said Howard Willard, Altria’s Chairman and Chief Executive Officer.

Cannabis companies are hot right now. (AP Photo/Jeff Chiu)

As part of the agreement, Altria will be able to nominate four members to Cronos Group’s board of directors. The board will increase from five to seven members.

An investment from Altria is expected to provide Cronos Group an opportunity for growth and expansion.

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

Shares of other cannabis companies rallied after the announcement. Canopy Growth (CGC) was up 2.6%. Tilray (TLRY) was up 5.6%.

The transaction is expected to finalize within the first half of 2019.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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