US Tobacco Company Takes Stakes in Canadian Cannabis Firms

Companies and Brands

Published: February 10, 2018 9:45 am

Last Updated: January 12, 2020 3:32 am

While not a household name, U.S. tobacco firm Alliance One International Inc. (NYSE: AOI) has one-upped its better known and much larger tobacco sellers by acquiring stakes in two Canadian firms involved in that country’s medical marijuana market. The acquisitions of the marijuana-related businesses are the first by a U.S. tobacco company.

Alliance One announced on 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 March 31, 2020.

Alcoholic beverage giant Constellation Brands Inc. (NYSE: STZ) acquired a 9.9% stake in Canada’s Canopy Growth for around $190 million. Canopy Growth is North America’s largest publicly traded cannabis-related firm, with a current market cap of $5.6 billion, and it made our list of 2017’s largest marijuana companies.

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 eliquids 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. Bob Crumley, 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-week trading range of $9.85 to 18.65. The company’s market cap is around $144 million, and its revenues for the first nine months of its fiscal year totaled $1.2 billion, with net income of $56.94 million ($6.32 per diluted share).

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