- The cannabis producer Cronos Group confirmed Tuesday that it had held talks with the cigarette maker Altria about Altria taking a stake in the company.
- Last week, The Wall Street Journal reported that Altria had held talks to take “a significant minority stake” in the e-cigarette startup Juul.
- These two buyouts “should come as no surprise” because the cigarette maker needs innovations to offset its softer top-line growth, according to Cowen analysts.
- Watch Altria trade live.
Altria, the maker of Marlboro cigarettes, could dig itself out of a bind by investing in two companies, the marijuana grower Cronos Group and the e-cigarette startup Juul, according to Cowen analysts.
On Tuesday, Cronos confirmed that it was “engaged in discussions concerning a potential investment by Altria” but that “no agreement has been reached.” And last week, The Wall Street Journal reported that Altria had held talks to take “a significant minority stake” in Juul, a three-year-old e-cigarette company based in San Francisco.
A deal with the two companies “should come as no surprise” because the cigarette maker needs innovations to offset its softer top-line growth, according to a group of Cowen analysts led by Vivien Azer.
According to Azer, Altria’s management in October told investors during its third-quarter earnings call that the secular decline in combustible cigarettes had accelerated driven by consumer transition to e-cigarettes.
“We have asserted since 2016 that cannabis would be a synergistic incremental growth driver for the tobacco industry given the opportunity to leverage IP around heat-not-burn and vapour technology,” Azer said.
And Joseph Lusardi, CEO of the cannabis grower Curaleaf agrees.
“The most interesting part of this pending transaction is that it’s the first time big-tobacco is making a strong foray into the cannabis space; something that people have been talking about since the 1980s,” Lusardi told Business Insider in an email on Tuesday.
“As one of the largest US-based players in the legal cannabis space, we believe this will be the first of possible moves by other multi-national companies into the North American cannabis market. For big companies with limited growth prospects, it will be hard to ignore the cannabis sector.”
Altria is now down 23% to $US54.40 at Tuesday’s close.
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