Cronos slams Ottawa's cannabis rules
Cronos Group Inc., the first marijuana company to list on a U.S. exchange, has reached a deal to acquire CBD businesses from Redwood Holding Group LLC, including high-end brand Lord Jones, in a US$300 million deal.
Cronos will pay US$225 million in cash and the balance in shares for four operating subsidiaries, the Canadian company said in a statement Friday, confirming an earlier report by Bloomberg.
Cronos rose 4.5 per cent at 9:40 a.m. in New York after earlier jumping as much as 6.4 per cent, the biggest intraday gain since June. Shares in the company -- the third-largest Canadian marijuana peddler by market value -- are up about 120 per cent in the past year, giving it a market value of about US$4.4 billion.
Redwood, founded in 2017, sells CBD-infused body lotion, bath salts and candies under the Lord Jones brand online and at retailers in the U.S. CBD -- formally known as cannabidiol -- is a derivative of marijuana that proponents say can alleviate everything from acne to insomnia. It doesn’t produce a high.
Cronos intends to retain Redwood’s management and brands, the company said in the statement. The transaction is expected to close in the third quarter.
The deal -- Cronos’s first in the U.S. -- is part of the Toronto-based company’s push to become one of the world’s top CBD companies, as countries increasingly loosen legal restrictions around pot.
In March, Cronos sold a minority stake to tobacco giant Altria Group Inc. for about US$1.8 billion, a deal that rejuvenated investor interest in the fast-growing marijuana sector. Cronos aims to use the partnership with Altria to expand in the U.S. CBD market, Chief Executive Officer Mike Gorenstein said in June.
“That’s something we’re very excited about, we’re very bullish on,” he said at an industry conference in New York hosted by Piper Jaffray Cos. “It’s something that we see as a huge market.”
Demand for CBD products has exploded since the U.S. made it legal to extract the substance from hemp last year. The U.S. CBD market is expected to be worth US$24 billion by 2023, according to Brightfield Group, a market researcher.
Perella Weinberg Partners LP was Cronos’s financial adviser, and Lazard Ltd. worked for Redwood.
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