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The cigarette maker Altria looks set to enter the cannabis market.

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Marlboro cigarette manufacturer Altria Group Inc. (MO.N) is in talks with Canadian cannabis producer Cronos Group Inc (CRON.TO) about a possible investment, Cronos said on Monday.

The announcement was made after Reuters announced Monday that Altria is in talks to acquire Cronos, as the tobacco giant seeks to diversify its activities beyond traditional smokers. Altria Group is eager to find a way to grow as smoking rates go down. The company seems poised to enter the cannabis market. Chief Executive Howard Willard, who took over at Altria last May, is clearly looking for ways to overcome the steady decline in smoking rates.

This year, Canada legalized the recreational use of marijuana and is seen as a testing ground for marijuana growers who plan to expand globally as more countries follow. Canada legalized marijuana for recreational use in October - the first of the Group of Seven countries to do so - giving companies a vast testing ground. Although cannabis is still illegal at the federal level in the United States, many states have taken steps to legalize it.

The US industry is well on its way to generating 11 2018 revenue in XNUMX, said Arcview Market Research and BDS Analytics in a report released earlier this year. As more states move toward legalization, the US cannabis market could reach 75 billion dollars by 2030, according to an estimate by Cowen & Co.

Cronos said no deal was reached on a transaction, adding that there was no guarantee that such discussions would lead to an investment or other transaction involving the companies. The acquisition of Cronos, the fourth largest cannabis company in Canada based on market valuation, would give Altria a means to enter the growing marijuana industry. It would also be the first incursion of a large tobacco company in the area. The alcohol industry has already begun to invest in cannabis, and companies that are "most at risk of substitution" - such as tobacco companies - are expected to follow suit.

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Altria, the parent company of Philip Morris USA, did not respond to requests for comment.

Cronos shares listed on the Nasdaq closed Monday up 11% 10,17 $, giving the company a market value of about 1,8 billion. Altria shares closed up 1,64% at 55,73 $ on the New York Stock Exchange on Monday. Shares of the Canadian company climbed to 9,2% at the end of the trading day after the announcement.

An agreement would mark one of the most important associations between tobacco and the thriving but volatile marijuana sector, which has attracted the interest of various large consumer companies that monitor the industry for disruptive threats and potential fast growing products.

In June London-based Imperial Brands Plc (IMB.L) took an undisclosed stake in Oxford Cannabinoid. Constellation Brands Inc. announced a $ 3,8 billion investment in Canopy Growth Corp. (WEED.TO) in August, while Coca-Cola Co (KO.N) said in September that it was monitoring the potential for alliances could help him develop products containing cannabinoids.

Cronos would represent a significant investment in cannabis for Altria, with a market value of 1,8 billion. Headquartered in Toronto, the company operates on five continents and has Canadian production capacity of 40 000 kilograms per year. She has a joint venture with the American cannabis retailer MedMen Enterprises Inc. to develop products and open stores across Canada. It has also entered into a partnership with Ginkgo Bioworks Inc. for the genetic engineering of cannabinoids.

Read also Californians can smoke and vape outdoors

The US group, weakened by the decline in the cigarette market, as its counterpart Philip Morris International, which markets its brands in the rest of the world. Both groups are also handicapped by the iQos take-off delay, the system of tobacco to heat invented by the PMI, a priori less harmful to health ...

"Iqos is working in France and sales are increasing, even if the market is still in its infancy," says Jeanne Pollès, president of Philip Morris France. Carlo Allegri / REUTERS

"Cronos Group is committed to becoming a leader in this industry, which can transform the perception of cannabis and elevates, responsible, the consumer experience," say the two companies.

Altria does not intend to stop using cannabis. According to the Wall Street Journal, the tobacco company is in discussion to take a stake in Juul Labs, American leader of the e-cigarette, which has just launched in France.

The cigarette maker Altria looks set to enter the cannabis market.
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