Marijuana Mergers: Altria Group Opens the Door to Major Deals
While marijuana stocks have pulled back with the chaos of the broader markets in late 2018, we cannot forget about the countless catalysts that are still out there.
One of the major catalysts involves mergers and acquisitions.
Alcohol companies have had significant interest, for example.
Months ago, Constellation Brands increased its stake in Canopy Growth (CGC) by $4 billion.
That came just months after Constellation first took a 10% stake in Canopy to help create nonalcoholic cannabis-infused drinks and other products.
All, as sales of beer fall in the United States, brewers have begun to bet that legalization of marijuana around the globe, especially the United States, will continue to build momentum and sales of cannabis products will take off.
Molson Coors even listed legal cannabis among the biggest possible risks to its business in its annual shareholder report. Even Coca-Cola expressed some interest at one point.
Now, cigarette makers are jumping into the fray, too.
For example, shares of Cronos (CRON) rocketed higher last week on news that Altria Inc. took at 45% stake in the company for $1.8 billion.
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"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria," said Howard Willard, Altria's CEO, as quoted by CNN.
Talks started, as the tobacco industry comes under pressure, as sales have begun to sharply decline. Just last year, cigarette smoking fell to its lowest point in history. Marijuana sales may bring back some of that lost revenue, though.
According to CNBC, “Counting both legal and black-market sales, the total demand for pot is approximately $52.5 billion, Marijuana Business Daily has reported.”
This could potentially lead to other major M&A deals in the industry following Altria and Constellation news. If nothing else, such major deals provide further evidence that the opportunities in the global marijuana industry are much more than just hype.
For Altria to invest $1.8 billion in a company isn’t small change.
We wouldn’t be shocked to see other pot stocks see further M&A interest moving forward.
Stay tuned for more on potential deals right here.
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