Shareholders in Lees Foods have hit out at the management buyout for the UK firm, insisting the company’s directors “have a battle on their hands” if they are to push through the bid.

Investor group ShareSoc has mounted a three-pronged defence against the 230 pence-per-share takeover bid for Lees Foods. It has argued the offer, which is worth GBP5.6m (US$8.9m), does not provide “fair value” for the company.

The offer price represents a 12.5% premium on the weighted average closing price for Lees Foods shares over the past six months and a 2.7% premium of the closing price of 224 pence on 5 April, the last trading day before the takeover bid was launched.

Shares in Lees Foods are trading at 229.4 pence per share.

ShareSoc director and Lees shareholder David Stredder said the offer comes in below market value if the company’s failure to deliver a dividend for the past financial year is factored in.

Lees Foods management had attempted to postpone publication of its financial results. The figures were released earlier this month only “because [Lees management] was forced to”, Stredder told just-food.

While Lees booked an 11.7% increase in net profit, management reversed a six year trend and failed to deliver a dividend to shareholders.

Stredder suggested Lees’ management wanted “to take the company off the market and take last year’s dividend away with it”.

He also emphasised the results showed the company ended the year with cash reserves of GBP2.1m and is due a tax rebate of GBP500,000.

“This is a very safe, very nice food company to invest in. They don’t have piles of debt and they have delivered good returns over the last six years,” he commented.

ShareSoc has therefore concluded that an offer in excess of 300 pence a share would be “acceptable”, although Stredder indicated that many shareholders had muted as mush as 340 pence per share.

The shareholders have lodged a complaint with the UK’s Takeover Panel, claiming that the recommendation provided by advisory firm Shore Capital was biased in favour of management because they would receive a higher fee if the 230 pence offer was accepted.

“This is very embarrassing for Shore Capital,” Stredder claimed. “They are meant to be acting for the shareholders, when in fact they were acting for management.”

In addition to this, when the takeover bid is put to shareholder vote for approval Stredder said he expects the proposal to be voted down.

The Lees buy-out team includes chief executive Clive Miquel and directors David Simon, Nadia Miller, Albert Croll and Klaus Perch-Nielsen, who collectively own around 48% of the Scottish cake maker.

However, the directors are not allowed to vote on the matter and as a consequence Stredder said it would only take 12.8% of voting capital to oppose the move in order for the proposal to be derailed.

“We are very close to that level,” Stredder said. “We think we already have enough support to prevent the takeover going through at the current price and I think that they [management] know it.”

According to ShareSoc, shareholders representing 11% of voting capital have joined their campaign against the takeover. In addition to this, Stredder said that he had spoken with two institutions who have indicated opposition to the deal. VTC Unicorn, which holds a 5.3% stake, and Deutsch Bank’s Tilney Investment Management, which holds 1.6% of shares, are both likely to vote-down the move, he suggested.

As a last line of defence were the proposal to proceed beyond a shareholder vote, Stredder said ShareSoc was determined to bring the matter before a court hearing to determine whether the matter had been handled in a “right, fair and proper” fashion.