Altria will pay another $1.4 billion for warrants that if exercised, would give the Altria a 55 percent ownership stake in the Toronto company.
The first Canadian cannabis grower to list its shares on a US stock market, Cronos said it plans to spend the money on product innovation, noting Altria's expertise in device technology and automation, and fuel Cronos's expansion into new countries amid a global shift toward loosening restrictions on the drug. It said it was doing so because it doesn't "see a path to leadership with these particular products", as well as the regulatory burden it faces to bring them to market. Altria's offer of C$16.25 a share represents a 16 percent premium from Thursday's closing price.
As part of the agreement, Altria will have the right to nominate four directors to the Cronos board, which will be expanded to seven members from five.
Cronos is a leading player in Canada's cannabis industry, which received full nationwide legalization earlier this year.
With U.S. smoking rates falling fast, Richmond, Virginia-based Altria is under pressure to find new avenues to expand.
Khalilzad meets Pak PM Imran, seeks assistance to end Afghan conflict
He said he doesn't know how long it will take to develop an Afghan force capable of defending its own country. Pakistan's action or inaction as it relates to stability in Afghanistan has often led to US's frustration.
Atria, formerly Philip Morris, makes the move after watching its stock tumble 25 percent this year and outlook on the company's growth projected at about one percent this year and 2019.
During the US midterm elections, MI became the latest state to approval the legalization of recreational cannabis and Utah and Missouri approved the drug for medical purposes.
That would mean Altria's investment would be in the same league as the $4 billion spent earlier this year by Constellation Brands to acquire shares of Canopy Growth Corp., another Canadian pot producer.
Cronos plans to focus on cannabis genetics, innovation and branding, while contracting with farmers to grow the product and working with retailers. This initial equity investment equates to a noteworthy 45% ownership stake in Cronos. Molson Coors Canada owns a 57.5 percent interest in the joint venture. It said the deal with Altria does not limit Cronos from any other partnerships. Altria shares that vision, Mr. Gorenstein said.
"Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria", said Howard Willard, Altria's CEO, in a statement.