U.S. hedge fund to vote against Canopy’s proposed US$3.4B acquisition of Acreage

SMITHS FALLS, Ont. — A U.S. hedge fund says it will vote against Canopy Growth’s proposed acquisition of Acreage Holdings, saying the US$3.4-billion offer is “substantially lower” than the U.S. cannabis company’s worth.

Marcato Capital Management, which manages funds that own roughly 2.7 per cent of Acreage’s outstanding shares, says the deal is “unbelievably lopsided” in favour of the Canadian cannabis company.

The San Francisco-based activist investor adds in its letter to Acreage’s board that its strategic value as one of the few multi-state operators in the U.S. merits a “significant premium.”

Marcato says it also expects enterprise values of cannabis companies in the U.S. will skyrocket once it becomes legal under federal law, and prefers that Acreage remains independent.

Canopy announced last month that it had signed a deal to buy Acreage once there was a “federally permissible” way to do so.

Cannabis is legal for medical and recreational purposes in several U.S. states, but it remains illegal at the federal level in the U.S. and is considered a Schedule 1 drug.

However, the political climate in the U.S. is becoming more receptive to cannabis. For example, the bipartisan STATES Act — which would amend the Controlled Substances Act and could effectively make cannabis federally legal in states where recreational consumption is legal — was reintroduced in Congress last month.

“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,” the hedge fund said in its letter to the board.

Companies in this story: (TSX:WEED)