The independent financial adviser to natural rubber producer GMG Global has deemed a buyout offer by Halcyon Agri "not fair but reasonable".

Halcyon, a rubber processor, is offering 0.9333 Halcyon Agri shares for each GMG share.

That implies a value of 69.5 cents a share, given Halcyon's closing price of 74.5 cents last month.

In a circular released by the firm yesterday, RHB Securities Singapore, the independent financial adviser to GMG's independent directors, said the terms of the offer are not fair.

The adviser said the offer will lead to the net tangible assets per share of GMG dropping from 74.52 cents to 38.91 cents, and the net asset value per share falling from 93.42 cents to 66.46 cents.

The offer is also below the net asset value of GMG as at June 30, and generally below the net tangible assets as at June 30.

It also said: "There is no certainty that the enlarged Halcyon group would remain profitable."

However, the adviser said the terms are reasonable as shareholders will be able to participate in the growth of the enlarged Halcyon group.

Halcyon is expected to offer "significant enhancement to market position and scale of operation" compared with GMG on its own.

It also said Halcyon shares are "relatively more liquid than GMG shares for most of the periods in our analysis".

Halcyon chief executive Robert Meyer on Wednesday said: "We're not going to revise the offer because we believe the offer is fair and we are not forcing anyone to accept it."

He said he understood some GMG shareholders may feel "buay song", and urged investors to see the offer as a "free option" with little downside. Buay song means "unhappy" in Hokkien.

The adviser told the independent directors to recommend that shareholders accept the offer, but only if the shareholders believe Halcyon can implement its business strategy.

"Otherwise, we advise the independent directors to recommend that shareholders reject the offer as, on balance, the offer is not fair from a financial point of view."