The first-of-its-kind agreement between Canada’s largest cannabis company by market cap, Canopy Growth, and the largest multi-state U.S. cannabis operator, Acreage Holdings, is slated for two separate shareholder votes June 19.
The deal in place for Canopy to acquire Acreage Holdings whenever cannabis sales become federally permissible in the U.S. will require at least 66% approval from shareholders in both companies in order to close.
In an interview Wednesday with Yahoo Finance’s YFi PM, the CEOs of both companies reiterated their belief that shareholders will overwhelmingly support the deal, with Acreage Holdings CEO Kevin Murphy estimating the odds of passage at “100%.”
“I’m still [at] 100%,” he said. “Everyone that I’ve spoken to — and I’ve spoken to many of our shareholders — are very, very excited about the combination of efforts. So, I feel very, very good about where we are and where we’re going.”
But despite Murphy’s optimism and Acreage’s board unanimously recommending the deal terms that would pass roughly $300 million dollars to Acreage shareholders and swap each Acreage share for about 0.58 Canopy shares, not all shareholders are set to vote in favor of the agreement.
Hedge fund Marcato Capital Management, which said it owned nearly 3% of Acreage’s outstanding shares, penned a note to Acreage’s board claiming the company agreed too hastily with Canopy at too low of a price, calling the deal “value destructive.”
Murphy shrugged off the criticism and also refuted Marcato’s estimation of its ownership stake, noting that the fund’s true stake is “less than 1%” of voting shares.
For his part, Canopy Growth CEO Bruce Linton echoed Murphy’s belief that the deal would successfully survive the June 19 vote.
“I can see why each of the parties would vote in favor if they understand the deal,” he said. “Our job is to translate this opportunity — to have a dominant player with ... billions of dollars we’re using to create intellectual property that we get to lend them for free is a pretty good asset.”
If the agreement passes, Murphy hinted Acreage’s expansion plans could immediately be kickstarted.
“Today, we have the 20-state footprint — largest in the United States and we’re going to look to increase that very quickly. The deal with Canopy is very important to us,” he said.
Doing so might be a necessity to keep pace with the consolidation that has hit the cannabis space. Earlier this month, East Coast cannabis operator Curaleaf announced a deal to acquire West Coast Cura Partners in the largest-ever deal between U.S. cannabis companies. Not to mention, Canadian competitor Aurora Cannabis continues to weigh ways it might move into the U.S. cannabis market, which is roughly 10-times as large as Canada’s. Aurora Chief Corporate Officer Cam Battley said last week emulating a Canopy-Acreage deal wouldn’t be out of the question — a scenario that wouldn’t surprise Linton.
“The way we’ve tried to build Canopy is kind of like a car with no rearview mirror,” Linton said. “Because I don’t find it very effective to look behind me when we’re going so quickly, and so I’m not really sure what they’ll do, but it’s been a very good practice to copy us. Most people then can at least fight over who’s gonna be second or third. So I wouldn’t be that surprised if this becomes a pattern that somebody else follows, because it’s a good deal.”
Shareholders will have a chance to echo that sentiment on June 19.