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Dec 3, 2018

Cronos soars on report Altria in talks to buy Canada pot company

A worker inspects cannabis plants growing in a greenhouse at the Hexo Corp. facility in Gatineau, Quebec, Canada, on Thursday, Oct. 11, 2018. Canada's drive to legalize marijuana kicks off early Wednesday with store openings on the Atlantic Coast, giving the country a massive head start in developing a global pot market that some analysts peg at $150 billion.

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Cronos Group Inc. (CRON.TO) soared, helping curb a broader decline in pot stocks, following a report that tobacco company Altria Group Inc. (MO.N) is in early talks to buy the Canadian cannabis producer.

Cronos jumped as much as 30 per cent in New York following the Reuters report, which cited unidentified people familiar with the matter. Altria also jumped.

Cronos spokeswoman Anna Shlimak said the Toronto-based company doesn’t comment on market rumors. Altria’s Steven Callahan didn’t immediately return requests for comment. The tobacco firm based in Richmond, Virginia, said in September it was exploring its options on cannabis but would follow U.S. federal law, where the drug remains illegal.

Tobacco stocks rose on the report. Altria rose to a session high, adding as much as 2.4 per cent, while Philip Morris International Inc. pared its decline.

Philip Morris, a spin-off of Altria, has said it isn’t interested in getting into cannabis. Chief Financial Officer Martin King in a November interview with Bloomberg reaffirmed that, saying the company had a lot going on in the tobacco space already. It has a "heat not burn" tobacco device, IQOS, which Altria would market in the U.S., if it gets regulatory approval.

The report caused the cannabis sector to moderate earlier declines prompted by a short-seller report that called Aphria Inc. a “black hole.” Aphria called the allegations “false and defamatory.” The company’s shares were down 20 per cent at 12:13 p.m. in Toronto.

The Horizons Marijuana Life Sciences Index ETF (HMMJ.TO) was up 0.2 per cent after earlier falling as much as 5.4 per cent. Tilray Inc. (TLRY.O) rose 3.3 per cent, reversing an earlier decline of 3.9 per cent, and Canopy Growth Corp. (WEED.TO) added 0.4 per cent after losing as much as 5.5 per cent.

--With assistance from Janet Freund and Tiffany Kary.

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.