Big Tobacco Enters the Legal Cannabis Business in Canada
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.
Last December, Alliance One acquired a 40% stake in a North Carolina company, Criticality, which grows industrial hemp under the state’s program to extract cannabidiol for medical use.
Alliance One also has an option to acquire up to 50% of Criticality on or after 31 March 2020.
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.
|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.