Canadian cannabis company Cronos Group Inc. bought U.S. CBD startup Lord Jones for $300 million, the deal was noteworthy for two reasons: (1.) that the acquisition price was equal to 75 to 150 times the young company’s 2018 revenue of between $2 million and $4 million, according to a person familiar with the matter, and (2.) that a fund co-founded by Cronos’s CEO and a longtime director stood to collect 40% of the purchase price, including more than $20 million in fees.

Cronos, one of Canada’s five biggest licensed cannabis producers, announced the acquisition of the 2-year-old startup in August.

As cannabis market leader Canopy Growth Corp. has attracted a $4 billion investment from beer, wine and spirits giant Constellation Brands STZ, Cronos have a $1.8 billion investment from tobacco company Altria Group Inc. MO, arming it with a war chest to fund acquisitions and grow its business.

Altria paid that sum to acquire a 45% stake in Cronos along with warrants that, if exercised, would raise that stake to 55%. The investment, made in December of 2018, gave Altria an exclusive partnership in the cannabis sector just months after Canada fully legalized weed.

Cronos’ CEO, Michael Gorenstein, and board member Jason Adler also have a private-equity firm called Gotham Green Partners that paid $12.8 million for a 40% stake in Lord Jones, according to a document reviewed by MarketWatch. Gotham Green used the document as what a cannabis industry investor described as a “pitch deck” for potential investors in one of its funds.

Gotham Green stood to make $21 million in fees, based on the management-fee structure outlined in the document, from a $107.2 million profit on the increase in the value of Lord Jones shares. Gorenstein and Adler recused themselves from the negotiations, which were conducted by a special committee, the majority of which were Altria appointees, according to a filing with the Canadian regulator.

A person familiar with the private company’s revenue said that its sales will grow “significantly” from that total this year, declining to elaborate further. Another person familiar with Lord Jones revenue said it achieved a monthly run rate of $2 million around the time Cronos announced its intention to buy the company.

Lord Jones — founded in 2017 by California married couple Robert Rosenheck and Cindy Capobianco — approached Cronos for the sale, after its co-founders decided that it needed a partner to expand the business, a Cronos spokeswoman said in an email to MarketWatch.

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