The Marlboro cigarette maker is taking a 45% stake in Cronos Group Inc., the Canadian medical and recreational marijuana provider said Friday.
Cronos said on Friday that the Richmond, Virginia, tobacco company will pay another $1.4 billion for warrants that if exercised, would give the Altria a 55 per cent majority ownership stake.
"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", Howard Willard, Altria's chairman and CEO, stated in an announcement.
"Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth", Mike Gorenstein, Cronos's chairman and chief executive officer said in a statement.
"As a company that operates predominantly in the highly-regulated tobacco industry, we believe Altria has valuable regulatory and compliance experience that could end up being a key competitive advantage for Cronos, as it competes with other licensed producers for what seems to be a growing set of global opportunities", Canaccord Genuity analysts wrote in a research note.
Shares of Cronos surged as much as 33 per cent to $18.56 on the Toronto Stock Exchange from its $13.98 closing price on Thursday.
FOX Business breaks down other companies that have eyed investments in the cannabis industry below. Cronos will remain a Canada-based company and will continue to be led by its existing management team.
Cronos, meanwhile, grows and sells medical and recreational cannabis in Canada, operating two growing facilities in Ontario and one in British Columbia.
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"When we were strategically planning how we would enter cannabis years ago, one of the companies that we looked at and had a lot of respect and admiration for was Altria", he said. "And they're seeing a ton of growth", he said in an interview.
Marijuana, while still illegal on the federal level in the U.S., is allowed in an increasing number of states.
Investors seem to be betting that more deals could be coming.
Coca-Cola (KO) was rumored to be considering an investment in Canadian cannabis company Aurora (ACB).
That would put Altria's investment in the same league as the $4 billion spent this year by Constellation Brands to acquire shares of Canopy Growth Corp., another Canadian pot producer.
The Cronos investment follows other deals in this space.
Gorenstein added that Cronos will use the investment from Altria to expand its distribution and infrastructure around the world and also boost its investments in research and development for new brands and products.