Canadian pot producer Cronos Group (CRON) on Monday announced an arrangement to invest in PharmaCann, a large multistate cannabis company in the U.S. Cronos stock and other marijuana stocks fell.

Under the deal, Cronos — whose higher-ups already have connections with PharmaCann — said a subsidiary had purchased an option to acquire around 10.5% of the U.S. company, which runs marijuana production facilities and dispensaries across six states.

The option, Cronos said, would be exercised based on 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."

Cronos, in total, paid around $110.4 million for the option. Cronos deposited that money to a "third-party paying agent."

PharmaCann runs six production facilities and 23 pot shops in New York, Illinois, Ohio, Maryland, Pennsylvania and Massachusetts. Once Cronos exercises the option, the two companies would be able to their products through each other's distribution networks. The agreement would also give Cronos a board seat or board observer.

The announcement is the latest effort by a Canadian cannabis producer to reach the U.S.

Tilray (TLRY), before the merger with Aphria, bought Manitoba Harvest, which sells hemp granola and CBD products in America. And Aphria bought SweetWater, a beer company that is also in the U.S.

Meanwhile, Canopy Growth (CGC) has a deal in place to buy U.S. cannabis operator Acreage Holdings.

The U.S. also has seen legalization prospects increase, lifting marijuana stocks earlier this year.

"We were attracted to PharmaCann as an investment because of their disciplined capital allocation, strong track-record and compelling licensed manufacturing and retail footprint," Kurt Schmidt, Cronos' CEO, said in a statement.

Links Between Marijuana Stocks

Cronos Group stock closed down 0.45% at 8.87 in the stock market today. Shares have a 34 Composite Rating and a 9 EPS Rating. Cronos' market share in Canada has remained small. Among other marijuana stocks, Canopy Growth lost 2.8%. Tilray fell 3.7%. Aurora Cannabis (ACB) was down 1.5%.

Mike Gorenstein, Cronos' current executive chairman and former CEO, and director Jason Adler hold an indirect interest in PharmaCann via their investment in a fund connected with Gotham Green Partners, a cannabis-focused private equity firm.

Gorenstein and Adler are co-founders of Gotham Green. Gotham Green is also a shareholder of PharmaCann.

Cronos, in announcing the deal with PharmaCann, said it created a special committee of independent directors to make recommendations to Cronos' board about the transaction. The board, other than Gorenstein and Adler, OK'd the investment.

Gotham Green Ties

In 2019, Cronos Group agreed to buy parts of Redwood Holding Group, which sells CBD products under the Lord Jones name, for $300 million. The company, at the time, disclosed that Gorenstein and Adler held an indirect interest in Redwood via their stake in some funds affiliated with private equity firm Gotham Green Partners, "which are each limited liability company members of Redwood Holding Group," according to a filing.

Marketwatch later reported that Lord Jones' revenue was small compared to the acquisition price. It also said Gotham Green had paid $12.8 million for a 40% stake in Lord Jones, potentially netting the fund millions.

Gotham Green has served as a financier to other cannabis companies, like U.S. cannabis retailer MedMen. Cronos Group in 2018 announced a partnership with MedMen, whose losses, lucrative executive compensation packages, and lawsuit troubles soured some cannabis investors and industry observers.