Altria-Backed Cannabis Producer Cronos Explores Sale

TORONTO-Cronos Group Inc, (CRON.TO) the Canadian cannabis producer backed by Altria Group Inc, the cigarette maker, has confirmed that it is currently engaged in discussions with potential buyers to explore the possibility of a sale, according to sources familiar with the matter. The news comes after reports by Reuters shed light on the ongoing talks.

To navigate these discussions and expressions of interest from various companies, including Curaleaf Holdings Inc, a U.S.-based peer, Cronos is working alongside a financial adviser, as per the anonymous sources. However, they cautioned that no final decision or transaction has been made at this stage.

Cronos, in an official statement, stated that it is in the initial stages of reviewing the indications of interest it has received. On the other hand, Curaleaf declined to provide any comments, while requests for comments from Altria’s spokespeople went unanswered.

Upon the release of this news, Cronos’ shares experienced a significant surge, rising as much as 25% on the Toronto Stock Exchange. However, the gains were ultimately relinquished, and the stock closed lower at $1.88. As a result, Cronos currently holds a market value of approximately C$954.62 million ($714.38 million). Unfortunately, the company’s shares have experienced a 25% decline in value so far this year.

The future of the cannabis industry remains uncertain as increased competition among companies arises from more favorable regulatory regimes in North America. Presently, recreational cannabis use is legal in 23 U.S. states. However, under U.S. federal law, the growth and sale of marijuana remain illegal, although President Joe Biden’s administration has expressed an interest in reviewing the drug’s classification.

Efforts are also being made by U.S. lawmakers to facilitate easier access to banking services for the cannabis industry.

In the first quarter, Cronos reported a net loss of $19.3 million, a decrease from the $32.7 million loss recorded the previous year. Additionally, net revenue experienced a 20% decline, amounting to $20.1 million. According to Cronos’ first-quarter report, the company’s total cash, including short-term investments, stands at approximately $836.43 million.

In 2019, Altria invested $1.8 billion in Cronos, securing a 41% stake in the company.