Cronos Group Inc. (NASDAQ:CRON) is currently in talks with Altria Group Inc. (NYSE:MO) concerning a possible investment by the latter. According to a statement by Cronos Group, the two parties have not yet agreed on any terms and it is not guaranteed that the discussion will yield to money changing hands.
Expansion Quest
Arguably, the Cronos Group needs the funding to facilitate its future expansion plans. The company already has operations spanning 5 continents with two licensed Cannabis Producers that it has 100% ownership of.
The company is among the few vertically integrated cannabis-based firms with rich distribution networks and production facilities globally. The company is focused on producing high-grade cannabis products that aims to improve user experience.
On its part, the Marlboro-maker tobacco giant is actively involved in diversification efforts considering that the cigarette industry is currently experiencing a bear year. By acquiring the Cronos Group, Altria Group would make a remarkable entry into the marijuana industry.
Rising stock
When reports about the possible takeover leaked, Cronos Group’s stock spiked by 23% to about $11.30 giving the company a valuation of approximately $2 billion. Cronos Group is the second cannabis company Atria Group has eyed so far. A few months ago it was reported that the Cigarette manufacturer was contemplating purchasing Aphria’s minority stake.
Ailing Cigarette industry
Statistics by the Centers for Disease Control and Prevention indicate that the number of cigarette smokers in the U.S declined drastically in 2017 to a record low. Evidently, old cigarette smokers are dying while only a handful of youngsters are picking up the habit.
This is typically not so good news for stakeholders in the cigarette industry, the reason major players like Altria are horizontally diversifying to remain relevant in the smoking game. While the cigarette industry is plunging, things are looking good in the marijuana and e-cigarette sectors.
The marijuana industry particularly controls a market cap of about $50 billion while the e-cigarette industry is projected to hit the $6.6 billion mark by the end of 2019.
