The directors of Australian grocery retailer Foodland Associated Limited (FAL) have today (Tuesday) recommended to shareholders that they reject a takeover offer by Metcash Trading Limited.

“The board has given detailed consideration to the Metcash offer. Our conclusion is that the Metcash offer is inadequate, of uncertain value and has unacceptable risks for FAL shareholders,” said chairman Len Bleasel. “Further, the Board believes that superior alternatives exist which are more favourable for FAL shareholders.”

“The Directors’ unanimous view is that the Metcash offer fails to recognise the strategic value of FAL and materially undervalues the Australian operations of FAL,” he said.

Metcash has proposed a plan to acquire Foodland’s Australian operations for A$846m (US$666.6m) and spin off Foodland’s New Zealand business into a separate unit.