Several U.S. states have legalized cannabis for medical or recreational use, but pot remains illegal under federal law.
"Altria's experience is very wide-ranging - not just in tobacco, but in adult beverages in different categories and decades of experience in how to bring different products to market", Cronos chief executive Michael Gorenstein said on call with analysts. The stock closed at $17.06, up 22 per cent.
The transaction is expected to finalize within the first half of 2019.
The deal will expand Cronos' board from five to seven seats, with Altria getting a total of four of them.
Cannabis companies are hot right now.
Altria's bet on Cronos could also prompt more similar deals in the sector, he added.
Cowen analyst Vivien Azer said it's not surprising that Altria opted for a pathway to a majority control of Cronos.
"As a company that operates predominantly in the highly-regulated tobacco industry, we believe Altria has valuable regulatory and compliance experience that could end up being a key competitive advantage for Cronos, as it competes with other licensed producers for what seems to be a growing set of worldwide opportunities", Canaccord Genuity analysts wrote in a research note. The Altria-Cronos deal is "encouraging" given the broad potential uses for cannabis such as in pharmaceuticals and health and wellness products, she said in a note to clients. Canopy Growth received a multibillion-dollar investment from Corona owner Constellation Brands in August, CNN Business reported.
Former Cubs infielder Luis Valbuena killed in a auto accident in Venezuela
The driver, former major leaguer Carlos Rivero who played briefly with the Red Sox in 2004, survived the accident. The Orange County Register says the auto they were in reportedly hit a rock on the road in the state of Yarucuy.
As well, USA tobacco leaf merchant Alliance One International said its subsidiary acquired a 75 per cent equity stake in Charlottetown-based Canada's Island Garden in January.
Also, the Canadian subsidiary of Molson Coors has a joint venture with The Hydropothecary Corporation for the production of "cannabis-infused drinks" in Canada.
Altria will acquire 146.2 million Cronos shares at a price of CA$16.25 per share, representing a 41.5% premium to the 10-day average price ending November 30, the last unaffected trading day before Cronos publicly disclosed discussions with Altria.
Cronos confirmed last Friday that it was in talks with Altria after a Reuters report.
That would mean Altria's investment would be in the same league as the $4 billion spent earlier this year by Constellation Brands to acquire shares of Canopy Growth Corp., another Canadian pot producer.
Cronos plans to prioritize research and development, innovation and developing brands. It said the deal with Altria does not limit Cronos from any other partnerships.
Separately on Friday, Altria said it would discontinue some of its e-cigarette brands, including all of MarkTen and Green Smoke e-vaper products, based on their financial performance and will take a related pretax charge of $200 million in the fourth quarter.