Sharebroker Forsyth Barr is recommending Michael Hill International (MHI) shareholders do not accept the 90c-a-share offer being made by Durante Holdings, a wholly owned subsidiary of one of the Hill family trusts.
Durante wants to buy 5% of the shares it does not own to take its holding to 50.2%.
Market commentators believed chairman Michael Hill had lost patience with shareholders, telling them they needed to take a longer view of the stock.
He had become frustrated with comments made about the overseas expansion plans that had not worked out as expected.
Yesterday, Forsyth Barr broker Suzanne Kinnaird said the Durante 90c offer was below her 98c-a-share valuation and was only for 5% of a shareholder's holding.
Grant Samuel valued MHI at between 98c and $1.15 a share.
"Our valuation is at the lower end of that range and our recommendation is hold.
We would look to upgrade our recommendation on price weakness," she said.
The company last week updated the market on trading and profit forecasts.
MHI's guidance was now for $45 million earnings before interest and tax, down from its earlier forecast of $49.9 million.
Ms Kinnaird said the new guidance was marginally above her forecast.
MHI had a good track record as a retailer and Forsyth Barr remained positive on the company's longer-term prospects, particularly in Australia.
"However, our valuation already assumes substantial and profitable store expansions in Canada and the United States and we would not expect this to be fully reflected in the share price until there is evidence of solid progress," she said.
