In a deal that shows how seriously America's largest companies take the cannabis industry, the tobacco giant Altria today announced it was buying a major stake in Cronos, a Canadian cannabis company.
"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 in a statement. "We believe that Cronos Group's excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential."
The tobacco giant will pay $1.8 billion U.S. dollars ($2.4 billion Canadian) to acquire 45 percent of Cronos, with an option to take a majority ownership position over the next four years.
Reuters first reported earlier this week that Altria was considering such an investment.
In Altria's annoucement, the company noted two points which help explain the rationale for its investment north of the border:
"Cronos Group has no U.S. operations, and cannabis remains illegal at the federal level," the company said in a statement. Through Cronos Group, Altria is better positioned should cannabis become federally permitted.
Canada legalized recreational cannabis nationwide earlier this year. That means Altria won't have to deal with the patchwork of regulation that characterizes the industry in the U.S., where the drug is legal in some states but still illegal under federal law.
For Oregon cannabis entrepreneurs, Altria's bold step both bad news and good news. The bad news is the corporatization of cannabis is inevitable. The good news is deep-pocketed investors like Altria will eventually come here pay large sums to those businesses that establish themselves under the current regulatory regime.
Canadian companies have already been investing in Oregon cannabis businesses, as WW reported in a cover story earlier this year.