Cerebos New Zealand's $71.6 million bid to buy Comvita undervalues the local honey products maker by as much as 38 per cent, according to the independent adviser's report.
Comvita's independent directors are urging shareholders to reject the hostile bid, having previously called it an "unsolicited, unwelcome, opportunistic" offer.
Adviser Grant Samuel valued Comvita at between $3.40 and $4 a share, a premium of between 26 per cent and 38 per cent to Cerebos NZ's $2.50 a share offer, and said there's no compelling reason for investors to accept the bid.
"This is not the time to sell your Comvita shares," chairman Neil Craig said in a statement. "If a buyer emerges willing to fully recognise the potential of Comvita, we will assess such an offer and report to shareholders."
Since the offer emerged last month, the shares have climbed 38 per cent to $2.90. That makes the offer a 16 per cent discount to the current trading price.
Last week, Comvita reported a first-half profit of $2.2 million, turning around a loss of $2.2 million a year earlier.
The offer came a month after Comvita settled a patent dispute with Brightwake, where it granted a sub-licence to the British rival letting it manufacture, distribute and sell its Algivon brand in territories where the Comvita subsidiary Apimed Medial Honey has patent protections. As part of the settlement, Comvita avoided a 226,000 pound payment.
The Te Puke-based company expects annual profit of between $7.3 million and $8.2 million, with sales likely to be between $91 million and $95 million.
In its bid, Cerebos pointed out Comvita had missed meeting forecast guidance in the past four financial years.
Cerebos NZ is the local bidding vehicle for Singapore-listed Cerebos Pacific, and will delist Comvita if it wins 90 per cent of acceptances, the minimum level needed to force compulsory acquisition.
If it falls short but declares the bid unconditional with at least 50 percent of the company, it will "seek appropriate representation on the Comvita board and will participate in decisions relating to Comvita and its future through the Comvita board," according to the offer document.
Sister company Cerebos Gregg's, whose local brands include Caffe L'Affare coffee, Bisto gravies, and Raro drink powder, recently invested $13 million to expand facilities in a joint venture at Mount Maunganui, and is spending $6 million on the country's only instant coffee producing plant in Dunedin.
Shares in Cerebos Pacific fell 1.5 per cent S$4.60 on the Singapore Exchange in trading yesterday.