One of Callon Petroleum Co.’s major shareholders said it plans to vote against the proposed acquisition of Carrizo Oil & Gas Inc. and is urging the board to instead pursue a sale.

Permian Basin pure-play Callon in July said it would buy Carrizo in an all-stock deal valued at $3.2 billion. The deal, set to be completed by year’s end, would expand Callon’s Permian leasehold and open a new exploration front in the Eagle Ford Shale, where Carrizo is focused. Investment management firm Paulson & Co. Inc., which holds an estimated 21.6 million shares, or 9.5% of Callon, in a letter to the board Monday said an expansion beyond the Permian was not what shareholders had bargained for.

Callon’s shares have slumped by 36% since the merger was announced, demonstrating “shareholder dissatisfaction with the deal and its terms,” Paulson partners Marcelo Kim and Jim Hoffman wrote in a letter to the board.

“Investors purchased Callon shares on the basis of the company’s commitment to be a pure-play, high-quality Permian producer. Because of this focus the company’s shares have historically traded at a meaningful premium to those of its multi-basin peers.”

Acquiring Carrizo’s “inferior Eagle Ford assets at an unwarranted 25% premium would eliminate this pure-play status, while effectively transferring $240 million in value from Callon’s shareholders to Carrizo’s.”

Callon shareholders “would be better off” if the board and management pursued a sale instead, the Paulson partners said. “We believe that there would be many acquirers interested in Callon. Problematically, adding Eagle Ford to Callon’s pure Permian portfolio would permanently discourage potential acquirers of Callon…

“By pursuing the Carrizo transaction, we can only conclude that the interests of the board and management, who collectively only hold 0.5% of Callon’s outstanding shares, have diverged from those of shareholders.”