Aphria May Have Sparked Interest from Big Tobacco

Aphria Inc. (TSX:APH), one of the Canadian marijuana stocks, moved higher after a media report suggested that Altria Group (NYSE:MO) is looking to take a minority stake

SmallCapPower | October 11, 2018: Aphria Inc. (TSX:APH) shares surged 15% to close at $20.06 on Wednesday following a media report that Altria Group (NYSE:MO), the maker of Marlboro cigarettes, is planning to buy a minority stake in Aphria. According to the Globe & Mail, Altria has expressed an interest in acquiring a minority stake, which would eventually be increased to a majority shareholding in Aphria, one of the Canadian cannabis stocks.

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Aphria is a Canadian cannabis company with a presence in more than 10 countries across five continents. They have been setting an industry standard for low-cost production of safe, clean and pure pharmaceutical-grade cannabis. The Company has a strong product portfolio designed to meet the needs of every consumer segment. Aphria has a diversified approach to innovation, strategic partnerships and global expansion, which might be of interest Altria Group.

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An Altria spokesperson declined to comment on rumors and speculation. And, Aphria said that there is no agreement, understanding or arrangement in place with a potential investor at this time.

There has been a trend towards investment into the cannabis space with beverage companies already striking strategic partnerships, and now it seems that even the Big Tobacco companies are looking for exposure. In June, Imperial Brands, one of the world’s largest tobacco giants, teamed up with the rapper Snoop Dogg’s cannabis-focused venture firm, Casa Verde Capital, to invest in medical cannabis research. In August, Constellation Brands, the beverage maker behind Corona beer and Svedka vodka, announced a $4 billion investment in the Canadian cannabis producer Canopy Growth, for a 38% stake once the deal is complete. As well, in September, Coca-Cola reportedly held talks with Aurora Cannabis to develop beverages infused with CBD, one of the non-psychoactive compounds found in cannabis.

Aphria announced recently that that it has closed its acquisition of LATAM Holding from Scythian Biosciences Corp. (CSE:SCYB). Aphria is consolidating operations in Latin America and the Caribbean regions through inorganic growth strategies – acquiring industry-leading cannabis companies in Colombia, Argentina and Jamaica as well as a right of first offer and refusal in respect of a majority interest in a Brazilian entity seeking a cannabis cultivation and sales license.

Aphria stock trades at a market capitalization of C$4.8 billion with a price-to-book multiple of 3.6x.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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