OSLO Tanker firm DHT Holdings (DHT.N) unanimously rejected late on Sunday the proposed deal by rival Frontline (FRO.OL), controlled by shipping tycoon John Fredriksen.
Last week Frontline made a non-binding offer to acquire all DHT's outstanding shares to create the largest private tanker firm in the world.
The "Frontline proposal is wholly inadequate and not in the best interests of DHT or its shareholders," DHT Chairman Erik Lind said in a statement.
"We believe that Frontline's proposal substantially undervalues our company and represents an opportunistic attempt to acquire DHT at a low point in the cycle."
Frontline, itself valued at $1.1 billion, proposed an all-share deal valuing the equity in DHT at around $475 million. DHT also has interest bearing debt of some $685 million. Frontline already owns 16 percent of DHT's shares.
"We could see Frontline raising its offer, but doubt that it will be a substantial raise as we struggle to see Frontline wanting to acquire DHT substantially above the latter's net asset value," Fearnleys said in a note to clients.
The DHT board said the Frontline proposal did not properly value DHT's contribution to a combined company and would result in an "unacceptable" dilution to DHT's shareholders.
"The execution of DHT's strategic plan will continue to drive significant and sustainable value for DHT shareholders," said DHT's Lind.
Shares in Frontline were up 0.54 percent at 0848 GMT. DH Holdings' closed at $4.91 on Friday.
(Editing by Terje Solsvik)