The tobacco behemoth behind one of the US’s most popular cigarette brands is in talks to buy a Canadian marijuana producer — one that is about to list a subsidiary in Australia.

Marlboro-maker Altria is in early talks to acquire Cronos Group, a Canadian marijuana producer, according to a Reuters report.

Cronos Group is the parent of  Cronos Australia, which is looking to raise $50m to list on the ASX in the coming months. It has a growers licence, a research licence, and a manufacturing licence, and plans to build a growing facility on a 120 acre site in Daylesford, Victoria, from 2020.

Its Canadian parent has not yet agreed to a deal, and the talks are expected to continue for several weeks, sources familiar with the matter told Reuters. Shares in the company rose as much as 23 per cent on the news, pushing Cronos Group’s market cap close to $US2 billion.

Altria is also reportedly in talks to purchase a minority stake in the vape startup Juul in an effort to diversify its business as cigarette smoking declines in the US.

Cronos isn’t the first marijuana producer that Altria has considered acquiring. The Globe and Mail reported in October that the company was considering purchasing a minority stake in Aphria — another company with Australian ties, as it owns about a quarter of Althea Group (AGH) and supplies all of their Australian-distributed products.

Short sellers, however, have targeted Aphria. Gabriel Grego, the founder of Quintessential Capital Management, said the company was a “black hole” on Monday at the Kase Learning Short-Selling Conference in New York.

Altria did not immediately respond to a request for comment, and a representative from Cronos declined to comment on “market rumours.”

If a deal is reached, it would represent the largest tie-up between the tobacco and marijuana sectors. In June, UK-based Imperial Brands invested through its venture arm in Oxford Cannabinoid Technologies a biotech company working on research into cannabinoids, the active compounds in the cannabis plant.

Tobacco giants are the latest in a line of consumer companies evaluating the burgeoning, but volatile, marijuana industry.

Constellation Brands, the beverage maker behind Corona and Modelo, paid $US4 billion in August for a 38 per cent stake of Canopy Growth. And Coca-Cola is reportedly eyeing a deal to produce beverages infused with cannabidiol (CBD), a non-psychoactive ingredient in marijuana, for the Canadian market.

Canada legalised marijuana for all adults in October.


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