Altria Group Inc. (NYSE:MO), one of the world’s biggest cigarette makers, is getting into the marijuana business by acquiring a 45% stake in Cronos Group (TSX:CRON), a Canadian medical and recreational marijuana provider.
Altria is paying $2.4 billion for its stake in Cronos Group, and will pay another $1.4 billion for warrants that, if exercised, would give Altria a 55% ownership stake in Toronto-based Cronos Group.
This makes Altria's investment similar to the $4 billion spent earlier this year by Constellation Brands (NYSE:STZ) to acquire shares of Canopy Growth Corp. (TSX:WEED), another Canadian marijuana company. The August investment by Constellation, which makes Corona and other alcoholic beverages, was the largest to date by a major U.S. corporation in the cannabis market.
Shares of Cronos Group Inc. jumped 31% and neared an all-time high at the opening bell Friday. Rapid growth in the cannabis market is expected to continue as legalization expands in the U.S. and social norms change. On Tuesday, ultra-conservative Utah became the latest state to legalize marijuana use for medical purposes.
Consumers are expected to spend $57 billion per year worldwide on legal cannabis by 2027, according to Arcview Market Research, a cannabis-focused investment firm. In North America, that spending is expected to grow from $9.2 billion in 2017 to $47.3 billion in 2027.
