The tobacco behemoth behind global cigarette brands is in talks to buy a Canadian marijuana producer.
Marlboro-maker Altria is in early talks to acquire Cronos Group, a Canadian cannabis producer, according to a Reuters report.
Cronos has not yet agreed to a deal, and the talks are expected to continue for several weeks, sources familiar with the matter told Reuters. Shares in the company rose as much as 23% on the news, pushing Cronos Group's market cap close to $2 billion (more than R27 billion).
Altria is also reportedly in talks to purchase a minority stake in the vape startup Juul in an effort to diversify its business as cigarette smoking declines in the US.
Cronos isn't the first marijuana producer that Altria has considered acquiring. The Globe and Mail reported in October that the company was considering purchasing a minority stake in Aphria.
Short sellers, however, have targeted Aphria. Gabriel Grego, the founder of Quintessential Capital Management, said the company was a "black hole" on Monday at the Kase Learning Short-Selling Conference in New York.
Altria did not immediately respond to a request for comment, and a representative from Cronos declined to comment on "market rumours."
If a deal is reached, it would represent the largest tie-up between the tobacco and marijuana sectors. In June, UK-based Imperial Brands invested through its venture arm in Oxford Cannabinoid Technologies a biotech company working on research into cannabinoids, the active compounds in the cannabis plant.
Tobacco giants are the latest in a line of consumer companies evaluating the burgeoning, but volatile, marijuana industry.
Constellation Brands, the beverage maker behind Corona and Modelo, paid $4 billion in August for a 38% stake of Canopy Growth. And Coca-Cola is reportedly eyeing a deal to produce beverages infused with cannabidiol (CBD), a non-psychoactive ingredient in marijuana, for the Canadian market.
Canada legalised marijuana for all adults in October.
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