Australian manganese miner Consolidated Minerals said it had rejected an A$849 million (US$713 million) takeover proposal from Territory Resources and would proceed with an agreed offer from Pallinghurst Resources.
Consolidated said in a statement on Friday it had significant concerns over the value and conditions attached to Territory's cash and scrip offer.
"The proposal requires our shareholders to accept Territory Resources scrip at a price which the board believes does not reflect Territory's underlying intrinsic value," Consolidated Chairman Dick Carter said in a statement.
Territory had indicated it would offer Consolidated A$1.50 per share cash and 1.5 of its own shares for each Consolidated share, with an implied deal value of A$3.73 a share.
Consolidated said Territory shares were trading at triple the value attributed to them by an independent expert in April 2007.
The offer was also subject to a range of conditions and therefore significant uncertainty, and required significant debt funding exposing Consolidated shareholders to additional risk, the company said.
Consolidated shares fell 0.9% on Friday to A$3.16. They had jumped over 9% in the week to Thursday's close as investors bet on a bidding war over exposure to rising prices for manganese, prized as a toughening alloy in steel making.
Territory's shares last traded at A$1.485.
Territory Resources Chairman Michael Kiernan, who ran Consolidated for eight years before being fired, made an incomplete offer for Consolidated on Thursday, trumping an agreed A$642 million bid by Pallinghurst.
Pallinghurst had earlier in the week boosted the cash component of its original bid by 22%, bowing to pressure from institutional shareholders who see more value in steel additives.
An independent expert has valued Consolidated shares at around A$2.33-A$2.77 a share.