Marlboro makers invest staggering $3.8 billion in Canadian cannabis firm after nationwide legalization

Marlboro maker Altria Group said on Friday that it will pay $2.4 billion for a 45 percent stake in Canadian marijuana firm Cronos Group


                            Marlboro makers invest staggering $3.8 billion in Canadian cannabis firm after nationwide legalization

The emerging cannabis industry has led one of the world's biggest tobacco companies in the world to invest $3.8 billion in the cannabis market.

Cronos Group, a Canadian medical and recreational marijuana provider, announced on Friday that Marlboro maker Altria Group Inc. is paying $2.4 billion for a 45 percent stake in the company. The tobacco giant is slated to pay another $1.4 billion for warrants, which would give them a 55 percent ownership stake in the Toronto company if exercised, Daily Mail reports.

A marijuana user blows smoke after taking a hit from a bong during a 420 Day celebration on 'Hippie Hill' in Golden Gate Park on April 20, 2018, in San Francisco, California. (Getty Images)
A marijuana user blows smoke after taking a hit from a bong during a 420 Day celebration on 'Hippie Hill' in Golden Gate Park on April 20, 2018, in San Francisco, California. (Getty Images)

Howard Willard, Altria's Chairman and Chief Executive Officer, said in a statement: "Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria. 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."

Earlier this year, a similar investment to the tune of $4 billion was made by Constellation Brands to acquire shares of Canopy Growth Corp., another Canadian marijuana producer. Constellation, which is known for making Corona among several other beverages, made the largest investment to date by a major U.S. corporation in the cannabis market with the said move.

The golden investment opportunities presented by the growing industry is raising the confidence of larger corporations in the U.S. to enter the cannabis market.

Cartons of Marlboro brand cigarettes are seen inside a Cigarettes Cheaper store on June 13, 2003, in Niles, Illinois. (Getty Images)
Cartons of Marlboro brand cigarettes are seen inside a Cigarettes Cheaper store on June 13, 2003, in Niles, Illinois. (Getty Images)

Meanwhile, Cannabis companies that have set up base in Canada witnessed their shares skyrocketing after Altria's huge investment. Recreational use of marijuana was legalized nationwide in Canada this year. At the opening bell on Friday, shares of Cronos Group Inc. neared an all-time high after jumping 31 percent since the news broke.

As legalization expands in the United States and social norms continue to change, the Cannabis market is set to witness rapid growth. Utah, a conservative state in the U.S., became the latest to legalize marijuana use for medical purposes on Tuesday.

According to ArcView Market Research, a cannabis-focused investment firm, consumers are expected to spend $57 billion per year worldwide on legal cannabis by 2027. That expenditure is expected to grow from $9.2 billion in 2017 to $47.3 billion in 2027 in North America.