Cronos Group: Altria (MO) to make $1.8 bln investment in exchange for 45% equity stake in newly issued shares at CAD$16.25/share (10.45)
As part of the agreement, at closing, Altria will have the right to nominate four directors, including one independent director, to serve on Cronos Group's Board of Directors, which will be expanded from five to seven directors. The agreement includes a warrant to acquire an additional ownership interest in Cronos Group at a price of CAD $19.00 per share exercisable over four years from the closing date. If exercised in full, the warrant would increase Altria's ownership in Cronos Group by 10% to approximately 55%.
Said on December 5, 2018:
CRON closed at $10.58 with a market capitalization of $982.7 million and less than $10 million in sales sported a low DG rating of 4. In essence, CRON cannot survive as a cultivator. The Game Changer is the talks with Altria Group, Inc. (MO) $54.46. The potential link up with CRON and the maker of Marlboro cigarettes changes the algorithm fashioned by our Subjective Probability- Game Theory Model. The revised indicator is the branding potential. Under the takeover scheme, CRON will become an exclusive branding play.
As predicted by our SP-GTM algorithm:
CRON has confirmed the discussion with MO, claiming the likelihood of its sale as a move to diversify from traditional smokers. While no agreement has been reached, the noise is too close to the source to be discounted as “hot air.” A full report on CRON will be the issue on December 7, 2018.
Since last year our proprietary SP-TGM algorithm predicted moves by the relevant commercial organizations into firms supporting cannabis-based products. The proposed takeover of CRON is a further example that national brands will dominate the cannabis sector. The trend has been visited before when other prized commodities evolved into low-profit margin ingredients, while the end products garnered the commercial successful — companies that value branding as an essential element will reap most of the rewards.
As we said on December 5, 2018, "GAME CHARGE."
The $1.5 billion investment of Altria (MO) in exchange for 45 percent stakes in newly issued shares at CAD $16.25 makes CRON a major player in product branding. SP-GTM projects CRON is a $35.00 stock in the near term.
BUY AT THE MARKET and enjoy the ride.