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‘Altria to possibly snatch up Cronos’
Posted on Tuesday, 04 December 2018 15:16
Canada-based medicinal cannabis producer Cronos confirmed recent media reports that it is in talks with cigarette manufacturer Altria Group, as the latter looks to broaden its portfolio and move away from traditional smoking products. Shares in the potential target closed down to USD 10.17 on 3rd December, following the rumour being made public, giving it a market capitalisation of USD 1.81 billion. However, Cronos cautioned that no deal or any other possible transaction between the two companies is guaranteed. Formed in 2012, the target specialises in the manufacturing and distribution of medicinal cannabis, with sites over five continents, and has two licensed producers, Peace Naturals Project and Original BC. Having recently completed the construction of a 286,000 square feet facility in Ontario, it posted revenue of CAD 10.09 million (USD 7.64 million) for the nine months ended 30th September 2018, a considerable increase on CAD 2.47 million in the corresponding period of 2017. A purchase would represent one of the largest collaborations between a mainstream tobacco company and the fast-growing medicinal cannabis industry. According to Zephyr, the M&A database published by Bureau van Dijk, the biggest deal targeting the tobacco manufacturing sector announced this year, involved Japan Tobacco buying Russia-based Donskoi Tabak for RUB 100.00 billion (USD 1.50 billion). Back in June, UK-based Imperial Brands agreed to buy Oxford Cannabinoid Technologies, for an undisclosed sum. Zephyr shows there have been 82 deals targeting all other miscellaneous crop farming services announced worldwide since the beginning of 2018. Constellation Brands, in the largest ever deal in this sector, agreed to buy Canopy Growth for CAD 5.07 billion. Sources familiar with another deal told Reuters Altria is also involved in talks to take a minority stake in cigarette manufacturer Juul Labs. Headquartered in Virginia, the potential buyer claims to be one of the world’s largest producers and marketers of tobacco. With more than 8,300 employees and over 200,000 retailers in the US, it generated revenue of USD 16.99 billion for the nine months ended 30th September 2018, down from USD 17.35 billion in the same period twelve months earlier. A deal will diversify Altria’s product range, as consumers are increasingly favouring e-cigarette and alternative smoking substances such as vaping. Citing US federal data, Reuters noted that cigarette use among adults is now at 14.0 per cent, the lowest in the country’s history. Conversely, statistics provided by Statista show that e-cigarette sales have flourished in recent years with total sales of USD 133.00 million for the entire US last year, and Juul contributing USD 54.00 million in convenience store sales in the year ended 16th December 2017. © Zephus Ltd