Affco Holdings, the listed meat processor, recommended shareholders reject a 37 cents-a-share takeover offer from South Island food producer Talleys Group, saying the current offer price did not reflect the true value of the company.

The offer comes after Toocooya Nominees, controlled by the Spencer family, agreed to sell its 23.5 per cent stake to Talleys. The deal takes Talley's total shareholding in Affco to 76.3 per cent, and has triggered an automatic offer for all outstanding shares under the Takeovers Code.

An independent committee, commissioned by Affco to review the offer, said in a statement that while the offer is a significant vote of confidence in the company's strategic direction, it did not reflect the "considerable investment in our plants over the last six years mostly funded through retention of profits within the business".

The committee has earlier established an equity valuation range for Affco of 34 cents to 44 cents per share.

However, it advised shareholders to sell if they needed a dividend payment in the short to medium term Affco's record of paying dividends has been sporadic, with shareholders receiving a 1 cent per share final dividend in 2006. The independent directors don't intend selling their shares into the offer, they said.

Affco, New Zealand's fourth largest meat processor and exporter, was established in 1904 and currently operates nine plants in the North Island and two plants in the South Island.

Shares Affco were unchanged at 37 cents. The stock has traded in a tight range between 36 cents and 40 cents since November 2009.