Fletcher Building takeover target Steel & Tube has told shareholders why the board has rejected the $282 million bid and how the listed business is on track to vastly improve the business.

Susan Paterson, Steel & Tube chairwoman, wrote to shareholders saying the company was making good progress with its "turnaround strategy".

The $1.70/share Fletcher offer undervalued the business and the proposal would face issues under the Commerce Act, she said.

Read more: Steel & Tube receives $282m takeover offer from Fletcher

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On September 10, Paterson said the board got the non-binding offer from Fletcher and sought expert legal and commercial advice from Chapman Tripp and First NZ Capital.

Fletcher's approach was unsolicited and unwelcome, Paterson said, but the offer indicated confidence in Steel & Tube's reputation and the strength of its business.

Fletcher obviously saw value in the company and its future potential, she said.

The Fletcher offer does not prevent higher-value approaches from other interested parties and the board would continue to act in shareholders' best interests, she said.

The company's priority now was its turn-around and it was continuing to make positive progress under this strategy, she said.

The business had well-balanced exposure in manufacturing, construction and rural sectors and was the only NZX listed opportunity for shareholders to invest directly in New Zealand steel without the risks of operating in many other high-risk sectors she said, referring to Fletcher without naming them.

Read more: Analysts divided on Fletcher's $282m steel takeover: The case for and against

Analysts have expressed doubts about the move. One cautiously supports the deal but is worried about potential hurdles like the Commerce Commission, another robustly opposes it for a number of reasons and a third says it will be strategically positive.

"Is it a deal, is it a steel?" asked Matt Henry and Matt Dunn of Forsyth Barr, supporting the hostile bid, opposed by the target company's board. Forbar supports the takeover as "probably the most logical and lowest risk opportunity for it to consider."

Fletcher told the NZX last week its preference was to work constructively with Steel & Tube's board to move its proposal ahead. Buying the company was in line with Fletcher's five-year strategy, announced in June, and fitted firmly within its focus on the Australasian building products and distribution sectors, the notice said.

Ross Taylor, Fletcher chief executive, said buying the company would create the leading steel distribution business in New Zealand and there was significant leverage in Fletcher's business model.

The $1.70/share price was attractive to Steel & Tube shareholders and Fletcher has support from institutional investors holding more than 20 per cent of shares.

Those have been reported to be Milford Asset Management and Harbour Asset Management, both supporting Fletcher's aspirations to buy the business and seeing value in the deal.

Steel shares are trading on the NZX today around $1.48, down on last Thursday's $1.59.