Country & Metropolitan, with a market value of about £15m, is half the size of Tay, but has bought 26% of its larger rival in the past year.
It first made an approach last October when the Yorkshire housebuilder became vulnerable after publishing disappointing trading figures.
But Tay questioned Country & Metropolitan's ability to make a credible offer and claimed the bid significantly undervalued its shares. Tay's board also a took a swipe at Country & Metropolitan's management, saying the company had a "chequered track record" in property development.
The statement said: "The board also has serious concerns with regard to the value of Country & Metropolitan's ordinary shares and in particular believes that the level of gearing … would pose an unacceptable level of risk to Tay shareholders." Tay said shareholders' interests would be best served by sticking with the current management and its strategy of reducing debt, which has fallen from £50m to £15m.
The board believes the level of gearing would pose an unacceptable level of risk
Tay directors’ view of the takeover offer
Country & Metropolitan has made an indicative offer valuing Tay shares at 113p in exchange for Country & Metropolitan's. An alternative cash offer values Tay shares at 105p, made up of 90p in cash and 15p in shares.
Tay and Country & Metropolitan were trading at 96.5p and 85.5p respectively at the start of the week.
Construction analysts said the offer left shareholders with a choice between the two differing management styles. One said: "Of course Tay is going to get stroppy: what Country & Metropolitan is offering is supposedly better management." Analysts said the City was sceptical about the bid as it now stood but predicted that it would come back to Tay with an improved offer.
