Big Tobacco Enters the Legal Cannabis Business in Canada

Big Tobacco Enters the Legal Cannabis Business in Canada

Big Tobacco Enters the Legal Cannabis Business in Canada

$AOI, $SZT

While not a household name, a big US tobacco firm, Alliance One International Inc. (NYSE:AOI) has 1-upped its better known and much larger tobacco sellers by acquiring stakes in 2 Canadian firms involved in that country’s medical marijuana market.

The acquisitions of the marijuana-related businesses are the 1st by a US tobacco company.

Alliance One announced last Thursday that through its Canadian subsidiary it had acquired a 75% stake in Island Garden, one of 35 Canadian firms fully licensed to produce and sell medicinal cannabis products, and an 80% stake in Goldleaf Pharma, a late-stage applicant for a license to produce and sell medical cannabis products in Ontario.

Terms and purchase prices were not disclosed.

Alcoholic beverage giant Constellation Brands Inc. (NYSE:STZ) acquired a 9.9% stake in Canada’s Canopy Growth for around $190-M.

Canopy Growth is North America’s largest publicly traded cannabis-related firm, with a current market cap of $5.6-B.

Alliance One’s traditional business has been as an independent leaf-tobacco merchant serving large international cigarette makers. The company also has a joint venture working in the electronic cigarette business making e-Liquids and flavors.

No major American cigarette maker has ventured into the marijuana business, but at least on North Carolina hemp farmer told Marijuana Business Daily that the day is coming.

The President of Founder’s Hemp, said, “R.J. Reynolds and other big tobacco companies have always had, in the back of their minds, one day being in the cannabis business.”

Tobacco farmers and outdoor cannabis growers can use the same cultivating equipment and drying sheds, and now that the federal 2014 Farm Bill has made hemp growing legal, the big tobacco firms are a good bet to begin investing.

Alliance One’s stock closed up 22.7% Friday, at $15.95 in a 52-wk trading range of 9.85 – 18.65. The company’s market cap is around $144-M, and its revenues for the 1st 9 months of its FY totaled $1.2-B, with net income of $56.94-M or $6.32 per diluted share.

Symbol Last Trade Date Change Open High Low Volume
NYSE:AOI 15.95 9 February 2018 2.95 18.2 18.65 15.8 815,900
HeffX-LTN Analysis for AOI: Overall Short Intermediate Long
Bullish (0.43) Very Bullish (0.69) Bullish (0.40) Neutral (0.19)

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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