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Canadian-based Cronos Group Inc. (NASDAQ: CRON) stock was rising over 2% on news that the company was buying an option to acquire 10.5% of U.S.-based PharmaCann for $110.4 million. The company said that the option exercise will be based upon various factors, including the status of U.S. federal cannabis legalization, as well as regulatory approvals, including in the states where PharmaCann operates that may be required upon exercise.

PharmaCann remains a privately-owned company that has a broad geographic footprint in the U.S. that includes six production facilities and 23 dispensaries operating under the Verilife brand across six limited license states: New York, Illinois, Ohio, Maryland, Pennsylvania, and Massachusetts. The New England states are particularly valuable. Pennsylvania and New York are only legal for sales of medical marijuana at this time, but New York adult-use sales will begin in 2022. The market is expected to be one of the largest in the country. Massachusetts continues to set records with its adult-use sales and Pennsylvania is expected to eventually follow suit. PharmaCann said it continues to invest in its manufacturing infrastructure and brand development to capitalize on the significant consumer retail and business-to-business wholesale opportunities.

Canadian companies are unable to trade on the Canadian securities exchanges if there is any U.S. company ownership since cannabis is still federally illegal in the U.S. This option will get triggered if the U.S. removes the illegality of cannabis sales at the federal level. It is a similar strategy that Canopy Growth (NASDAQ: CGC) took with its option with Acreage Holdings.

“Our U.S. growth strategy focuses on delivering long term shareholder value by assembling a best-in-class brand and intellectual property portfolio and positioning to deploy our products in the U.S. market through investments and opportunities with U.S. leaders who share our vision and commitment to responsibly distributing disruptive cannabinoid products that improve people’s lives,” said Kurt Schmidt, President and Chief Executive Officer of Cronos Group. “We were attracted to PharmaCann as an investment because of their disciplined capital allocation, strong track-record and compelling licensed manufacturing and retail footprint. Further, we are excited to partner with PharmaCann because of our shared commitment to elevating product quality and consistency through science and best in class operations and manufacturing.”

Once the option is exercised, Cronos Group and PharmaCann will enter into commercial agreements that would allow each other to sell products through either party’s distribution channels. In addition, Cronos Group and PharmaCann could enter into an investor rights agreement that would provide Cronos Group with certain governance rights, such as a board seat or board observer subject to certain conditions, and a registration rights agreement that would provide Cronos Group with customary registration rights of PharmaCann common stock.

“We are pleased to announce our strategic alliance with Cronos Group,” said Brett Novey, Chief Executive Officer of PharmaCann. “This investment validates our position as a leading vertically integrated U.S. cannabis company and highlights our ability to continue to expand and enhance our strong asset base. We are excited to work with Cronos Group as we advance PharmaCann’s mission to improve people’s lives through cannabis.”

Cronos Stock Gets Lift From PharmaCann Investment on Green Market Report.