Broadspectrum has resoundingly urged shareholders to reject the $692 million takeover offer from Spanish company Ferrovial, saying it significantly undervalues the detention centre operator.
Ferrovial has offered $1.35 for each Broadspectrum share but the takeover target says independent adviser Ernst & Young has valued them at between $1.71 and $1.98.
That represents a 27 per cent discount on a mid-point valuation of $1.845 per share, the company says.
"Your Broadspectrum shares are worth a lot more than Ferrovial is offering," chairman Diane Smith-Gander wrote in a letter to shareholders on Thursday.
"This is the unanimous view of your directors and is supported by the independent expert who has concluded that the offer is not fair and not reasonable."
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Shares in Broadspectrum, which operates the federal government's immigration detention centres on Manus Island and Nauru, had closed at an 18-month low of 85 cents prior to Ferrovial's offer.
The company has since announced contracts worth $1.1 billion in revenue and is the preferred tenderer for a new five-year contract to operate the off-shore detention centres.
Its shares were $1.255 at the close on Wednesday, down more than 10 per cent in 2016.
The benchmark S&P/ASX200 has dropped about 8.5 per cent in the same period.
Ferrovial already had an earlier $2.00 per share offer rejected in December 2014.
"Broadspectrum is in a stronger position now than in December 2014, when Ferrovial indicated a willingness to pay significantly more for your Broadspectrum shares," Ms Smith-Gander wrote.
She also raised concerns that Ferrovial's offer, which is scheduled to close on February 8, is subject to 25 conditions.
