Australian kitchenware firm GWA Group is mounting a $118 million bid for Kiwi tapware maker Methven and has the blessing of cornerstone investor Brendan Lindsay, barring a better offer emerging.

Methven's directors have agreed to a scheme implementation agreement in which GWA would pay $1.60 a share, a 39 per cent premium to the $1.15 price before the deal was announced today.

Since trading resumed, the shares have climbed 23 per cent to $1.41. GWA would also let Methven pay an interim dividend of up to 5 cents from profits in the six-month period ending December 31.

The New Zealand firm's directors are obliged to unanimously recommend the offer, provided it falls within the assessed valuation range of independent adviser Grant Samuel, and provided no superior bid emerges. The agreement includes a $1.2m break fee, the equivalent of 1.6 cents per share.

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GWA already has Methven's biggest shareholder - Sistema millionaire Lindsay - onboard, giving it 19.9 per cent. Another 2.1 per cent will be committed by the directors, meaning the Australian firm starts at 22 per cent.

To secure control, it only needs 75 per cent support at a meeting where at least half the company's voting rights are cast, rather than the 90 per cent threshold needed in a formal takeover to enforce mop-up provisions. The meeting is expected to be held in March next year.

"The value offered, which includes the permitted dividend, is highly attractive as it does acknowledge future growth in Methven and allows shareholders to realise value today," chair Alison Barrass said in a statement.

"Given there was a high level of understanding between both parties, a scheme proposal was seen as the best and fairest way of expediting this transaction and providing certainty of outcome within a defined timeframe at an agreed and compelling value."

Methven said GWA has committed to keeping the New Zealand design, innovation and manufacturing base for the enlarged group. That was a crucial element of the deal, it said.

GWA said it expects to cut duplicated costs by about $5m by the 2021 financial year, primarily in logistics, freight, and listing costs. It sees the deal as boosting per-share earnings by a mid-single digit in the 2020 year, rising to a high-single-digit gain once the doubled up costs are stripped out.

The Australian company will fund the deal from its existing banking facilities.

"The transaction will enhance the regional diversity of our revenue and earnings through leveraging Methven's presence in international markets to accelerate growth opportunities for Methven and GWA brands aligned to our core water solutions," GWA managing director Tim Salt said.

"The combination of GWA and Methven will create a stronger trans-Tasman business, which will allow us to strengthen our offering in bathroom and kitchen fixtures."

GWA last traded at A$2.77 on the ASX, and has decreased 2.8 per cent so far this year.

The scheme also needs High Court approval, and the transaction will require Overseas Investment Office sign-off.