Altria-backed cannabis producer Cronos explores sale, sources say

Cronos Group Inc, the Canadian cannabis producer backed by cigarette maker Altria Group Inc, is exploring options that include a potential sale after attracting acquisition interest, people familiar with the matter said.

Toronto-based Cronos is working with a financial adviser to handle the expressions of interest in a deal from other companies, including US-based peer Curaleaf Holdings Inc, the sources said.

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

Cronos and 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, giving the company a market value of $771.13 million (about RM3.6 billion). Prior to Thursday, the shares had lost a quarter of their value so far this year.

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

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

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

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