Altria Group Inc, the company that makes Marlboro cigarettes, is in talks with Canadian cannabis producer Cronos Group regarding a potential takeover.
The tobacco company is reportedly looking to shore up stagnant sales by acquiring Cronos.
A boost in shares
Cronos Group’s stocks surged by 25% on Monday after Reuters reported that the cannabis producer might be a buyout target for Altria.
Cronos shares listed on the Nasdaq closed trading on Monday with an 11 percent boost at $10.17. This gives Cronos a market value of about $1.8 billion.
Meanwhile, Altria shares ended trading at $55.73, up 1.64 percent, on Monday on the New York Stock Exchange.
Altria’s shares have plunged more than 20 percent over the year as smoking tobacco continues to decline in the U.S. In fact, according to federal data from earlier this month, cigarette smoking among American adults reached around 14 percent in 2017, which is the lowest level ever recorded.
As tobacco smoking rates decline, Altria and other big tobacco companies have been investing in e-cigarettes.
No final agreement yet
Cronos, which seeks to diversify its cannabis business beyond traditional smokers, confirmed in a statement that it was discussing a potential investment by the tobacco producer. However, the pot company clarified that they have not yet reached an agreement with Altria.
Cronos also did not admit that it has already agreed to the acquisition offer. The company said that there could be no assurance that these discussions would lead to an investment by Altria or any other transaction involving the tobacco manufacturer.
It is expected that the discussions between the two companies will extend into the new year.
Canada legalized recreational cannabis less than two months ago, and experts view this as a testing ground for marijuana companies that want to expand globally as other countries follow with their own legalization moves.
Altria is the parent company of Philip Morris USA.
A deal between the two companies would mark as one of the largest mergers between mainstream tobacco and the promising cannabis sector.