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Despite uncertainties, cannabis firms emerge as top takeover targets

In all probability, 2019 will be the year of cannabis as far as Wall Street is concerned. After the beverages and healthcare companies, the tobacco industry is now looking to tap the potential of marijuana. According to reliable sources, tobacco giant Altria Group (MO) is in early-stage discussions with the management of Canada-based cannabis company Cronos Group (CRON) to acquire the latter.

In the changed scenario, tobacco firms keep looking for suitable avenues to diversify their business, concerned over the uncertainties surrounding the production and sale of the traditional cigarette. Cigarette companies can use marijuana for value addition more effectively than any other industry.

Altria is reportedly in talks with Canada-based cannabis company Cronos Group to acquire the latter

Altria, which is known for its popular cigarette brands like Marlboro, reportedly held talks with e-cigarette company Juul recently to acquire a major stake in it. Meanwhile, no deal has been confirmed between Altria and its potential buyout targets yet.

The tobacco industry is currently going through a difficult phase, amid falling cigarette sales mainly due to the low demand among youngsters. Though the emergence of e-cigarette as a ‘healthier’ alternative to traditional tobacco products is seen as a positive sign, vaping devices are currently facing regulatory restrictions for the potential risks they pose.

FDA adds restrictions on sale of e-cigarettes

Cannabis, which is being legalized in more and more markets, is steadily gaining acceptance as a raw material in the production of certain medical formulation and soft drinks. If the Altria-Cronos deal materializes, it would mark the beginning of a new trend, for it would be the first time a tobacco company venturing into pot-based business in a full-fledged manner.

Soon after the media reports, Cronos (CRON) shares gained about 12% Monday. A similar spike was witnessed in the price of Altria’s stock, which moved up around 2%, recovering from the recent plunge that dragged it to a four-year low.

 

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