Altria Invested USD $1.8 Billion for Approximately 45% Ownership
Interest
with Warrant to Increase Ownership over the
Next Four Years
RICHMOND, Va.--(BUSINESS WIRE)--
Altria Group, Inc. (Altria) (NYSE:MO) announced today the completion of
its approximately USD $1.8 billion (CAD $2.4 billion)1
investment in Cronos Group Inc. (Cronos Group) (TSX: CRON and NASDAQ:
CRON), a leading global cannabinoid company, following receipt of
shareholder and Canadian regulatory approvals.
Altria’s investment represents an approximate 45% economic and voting
interest in Cronos Group with a warrant to acquire additional ownership
at a price of CAD $19.00 per share, exercisable over the next four
years. If exercised in full today, the warrant would increase Altria’s
ownership in Cronos Group to approximately 55%. The aggregate exercise
price for the warrant is approximately USD $1.0 billion (CAD $1.4
billion)2.
Under the terms of the transaction, Altria nominated four directors who
were recently elected to serve on Cronos Group’s seven member board:
Kevin C. Crosthwaite, Jr., Murray R. Garnick, Bruce A. Gates and Bronwen
Evans.
“We’re excited to finalize our investment in Cronos Group and to support
their talented team,” said Howard Willard, Altria’s Chairman and Chief
Executive Officer. “Cronos Group is our exclusive partner in the
emerging global cannabis category and represents an exciting new growth
opportunity for Altria.”
“We are delighted to close this transaction and kick-off a relationship
that we expect to lead to significant growth and value creation,” said
Mike Gorenstein, Cronos Group’s Chairman, President and Chief Executive
Officer. “Altria’s investment and the services they will provide to
Cronos Group will enhance our financial resources and allow us to expand
our product development and commercialization capabilities and
regulatory expertise to better position Cronos Group to compete, scale
and lead the rapidly growing global cannabis industry. We look forward
to the many opportunities we expect this relationship to create.”
Accounting Treatment
Altria expects to account for its investment in Cronos Group under the
equity method of accounting. Altria will report its share of Cronos
Group’s results using a one-quarter lag because Cronos Group’s results
will not be available in time for Altria to record them in the
concurrent period. For example, Altria’s share of Cronos Group’s results
for the relevant, post-closing portion of the first quarter of 2019 will
be recorded in Altria’s 2019 second-quarter statement of earnings.
Altria will record changes in the fair value of the warrant as gains or
losses in Altria’s consolidated statements of earnings in the periods in
which the changes occur and exclude these amounts from Altria’s adjusted
results.
Altria’s Profile
Altria’s wholly-owned subsidiaries include Philip Morris USA Inc. (PM
USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co.
(Middleton), Sherman Group Holdings, LLC and its subsidiaries (Nat
Sherman), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip
Morris Capital Corporation (PMCC). Altria holds equity investments in
Anheuser-Busch InBev SA/NV (AB InBev), JUUL Labs, Inc. (JUUL) and Cronos
Group Inc. (Cronos Group).
The brand portfolios of Altria’s tobacco operating companies include Marlboro®,
Black & Mild®, Copenhagen® and Skoal®.
Ste. Michelle produces and markets premium wines sold under various
labels, including Chateau Ste. Michelle®, Columbia
Crest®, 14 Hands® and Stag’s Leap
Wine Cellars™, and it imports and markets Antinori®,
Champagne Nicolas Feuillatte™, Torres®
and Villa Maria Estate™ products in the United States.
Trademarks and service marks related to Altria referenced in this
release are the property of Altria or its subsidiaries or are used with
permission.
More information about Altria is available at altria.com and on the
Altria Investor app, or follow us on Twitter, Facebook and LinkedIn.
About Cronos Group
Cronos Group is a globally diversified and vertically integrated
cannabis company with a presence across five continents. Cronos Group
operates two wholly-owned Canadian licensed producers: Peace Naturals
Project Inc., which was the first non-incumbent medical cannabis license
granted by Health Canada, and Original BC Ltd., which is based in the
Okanagan Valley, British Columbia. Cronos Group has multiple
international production and distribution platforms and partnerships
across five continents. Cronos Group intends to continue to rapidly
expand its global footprint as it focuses on building an international
iconic brand portfolio and developing disruptive intellectual property.
Cronos Group is committed to building industry leading companies that
transform the perception of cannabis and responsibly elevate the
consumer experience.
Cronos Group has no U.S. operations, and cannabis remains illegal at the
federal level.
Forward-Looking and Cautionary Statements
This release contains projections of future results and other
forward-looking statements that involve a number of risks and
uncertainties and are made pursuant to the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
Important factors that may cause actual results and outcomes to differ
materially from those contained in such forward-looking statements
include, without limitation, the possibility that the expected benefits
of the transaction may not materialize in the expected manner or
timeframe, if at all; the potential inaccuracy of the financial
projections; prevailing economic, market, or business conditions
negatively affecting the parties; risks that the transaction disrupts
Cronos Group’s current plans and operations; the fact that Altria’s
reported earnings and financial position and any dividends paid by
Cronos Group on shares owned by Altria may be adversely affected by
unfavorable foreign currency exchange rates, tax and other factors,
including the risks encountered by Cronos Group in its business; risks
related to the disruption of the transaction to Altria, Cronos Group and
their respective management; risks related to the effect of announcement
of the transaction on Cronos Group’s ability to retain and hire key
personnel and maintain relationships with customers, suppliers and other
third parties; and the other factors detailed in the parties’ publicly
filed documents, including Altria’s Annual Report on Form 10-K for the
year ended December 31, 2018 and Cronos Group’s filings with the
Canadian Securities Administration and the United States Securities and
Exchange Commission.
Altria cautions that the foregoing list of important factors is not
complete and does not undertake to update any forward-looking statements
that it may make except as required by applicable law. All subsequent
written and oral forward-looking statements attributable to Altria or
any person acting on its behalf are expressly qualified in their
entirety by the cautionary statements referenced above.
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| 1 |
Based on exchange rate of 0.7557 USD / CAD which includes the impact
of derivative financial instruments that Altria entered into to
hedge its exposure to currency exchange rate movements.
|
| 2 |
Based on reference exchange rate of 0.7432 USD / CAD at market
close on March 7, 2019 as quoted by Bloomberg.
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Altria Client Services
Investor Relations
804-484-8222
Altria Client Services
Media Relations
804-484-8897
Source: Altria Group, Inc.