Joining Big Alcohol, Big Tobacco Has Now Ventured Into the Canadian Cannabis Industry

By Rick Schettino
Source: potnetwork.com

Tobacco giant Alliance One International Inc. (NYSE:AOI), announced on Thursday news of their 75 percent equity position in Canadian-licensed producer Island Garden Inc. and their 80 percent stake in lp Goldleaf Pharm Inc. With AOI already a major investor in a North Carolina hemp company, this marks the first public entry into the marijuana industry by a tobacco company, and the second time a publicly traded US company has invested in a Canadian cannabis company. Back in October, alcohol giant Constellation Brands, bought a 9.9 percent stake in Canopy Growth Inc. (TSX:WEED) for US$190 million.

The marijuana industry is expected to take substantial market share away from both alcohol and tobacco. Many had long speculated that it would be only a matter of time before big players from both industries became involved.

According to AOI, the two Canadian cultivators were purchased in January through the tobacco firm’s subsidiary, Canadian Cultivated Products Ltd.

Island Garden operates a 20,000-square-foot indoor growing facility in Charlottetown, Prince Edward Island. And Goldleaf Pharm, an applicant to become a licensed medical marijuana cultivator in Ontario, Canada, is constructing a 20,000-square-foot indoor growing facility with plans to add 710,000 square feet of production over a three-year period.

AOIs move follows their recent acquisition in December of a 40 percent equity position in North Carolina-based hemp producer, Criticality LLC.  That deal comes with an option for consolidation of up to 50 percent by 2020. Criticality grows industrial hemp in North Carolina under the state’s pilot program for CBD extraction.

Alliance One is an independent tobacco company which serves large multinational cigarette manufacturers. Although the company does not actually grow tobacco, it does purchase leaf tobacco from growers in North America, South America, Africa, Asia, and Europe. The tobacco is then processed, packed, stored, and shipped to big players in the industry.

Alliance One’s president and CEO, J. Pieter Sikkel, said the company intends to “broaden our business portfolio over the next three to four years by focusing on consumer-driven agricultural products, with increased operating margins when compared to our historical leaf processing businesses.” Terms of both transactions were yet to be disclosed.

According to AOI, sales increased 8.8 percent to $1.2 billion over the first nine months of their fiscal year. Net earnings for that nine-month period were $56.9 million, or $6.34 per share.

As of the close of trading on Friday Alliance One prices were up $2.95 per share for a 22.69 percent increase. The company closed the day at $15.95 per share.