(Bloomberg) -- Activist investor Marcato Capital Management said it plans to vote against a proposed $3.4 billion takeover of Acreage Holdings Inc. by Canopy Growth Corp., arguing the transaction undervalues the U.S. marijuana producer.
The San Francisco-based hedge fund, which owns 2.7 percent of Acreage, said in a letter to the company’s board Monday it would prefer Acreage to remain independent.
If Acreage were to pursue a sale, it should invite Canopy to participate in an auction alongside other major spirits, beer, beverage, tobacco, cannabis, and consumer companies, Marcato said.
"We believe enterprise values of cannabis companies will skyrocket upon the relaxation of current federal restrictions," Mick McGuire, Marcato managing partner, said in the letter. "Accordingly, Marcato believes it is highly imprudent for Acreage to sell itself today at the proposed valuation, with so much unlocked growth and value embedded in the company."
Representatives for Canopy and Acreage didn’t immediately respond to requests for comment.
Canopy, the world’s most valuable pot company, agreed last month to acquire the New York-based Acreage Holdings Inc. in a cross-border deal that may usher in wave of consolidation in the burgeoning industry.
The terms are unfavorable for Acreage holders, McGuire said, noting the 6 percent slide in Acreage’s shares and a 15 percent increase in Canopy’s stock since April 17, the day before the deal was announced. That’s evidence that others agree, he said.
"The relative value is unbelievably lopsided in Canopy’s favor," McGuire said. "Canopy stock for Acreage stock is simply a bad deal for Acreage shareholders."
McGuire said it was his understanding that no third-party bidders were given the opportunity to submit a competing offer.
He also questioned the fairness opinion that Acreage was given by Canaccord Genuity Group Inc., which valued the company at $27.48 a share four months after the brokerage’s sell-side analysts had a price target of $35 on the company.
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