Altria-backed cannabis producer Cronos explores sale

Cam White | July 7, 2023

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By Anirban Sen

NEW YORK (Reuters) -Cronos Group Inc, the Canadian cannabis producer backed by cigarette maker Altria Group Inc, confirmed on Thursday it is in talks with potential buyers to explore a sale of the company, after Reuters reported on the talks.

Cronos is working with a financial adviser to handle expressions of interest in a deal from other companies, including U.S.-based peer Curaleaf Holdings Inc, according to people familiar with the matter.

The sources requested anonymity because the discussions are confidential, and they cautioned that no transaction is certain.

In a statement, Cronos said it “is in the initial stages of reviewing these indications of interest.”

Curaleaf declined to comment. Spokespeople for Altria did not immediately respond to a request for comment.

Shares of Cronos jumped as much as 25% in Toronto on the news, before giving back all gains and closing lower at $1.88, giving it a market value of C$954.62 million ($714.38 million). So far this year, the shares have lost a quarter of their value.

The future of the cannabis industry is uncertain as more favorable regulatory regimes in North America have fueled fierce competition among more companies.

The recreational use of cannabis is now legal in 23 U.S. states. Growing and selling marijuana remains illegal under U.S. federal law, although President Joe Biden’s administration has signaled it is seeking a review on how the drug is classified.

U.S. lawmakers have also been considering making it easier for the industry to access banking services.

For the first quarter, Cronos posted a net loss of $19.3 million, compared with a loss of $32.7 million a year ago. Net revenue declined 20% to $20.1 million. Cronos has total cash, including short-term investments, of about $836.43 million, according to its first-quarter report.

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

($1 = 1.3363 Canadian dollars)

(Reporting by Anirban Sen in New York; Additional reporting by Abigail Summerville in New York; Editing by Leslie Adler, Richard Chang and David Gregorio)