In a statement to the Australian Securities Exchange (ASX), The Trust Company told its shareholders that the offer by EQT will not give shareholders a fair proportion of the combined companies if the deal goes ahead and advised they reject the bid.
"Your board recognises that combining The Trust Company and EQT could create significant value for shareholders of both companies, and directors would be supportive of a combination of the two companies, provided it was on appropriate terms," The Trust Company chairman Bruce Corlett said in the statement.
"However, your directors believe the offer would not give you your fair share of the combined companies - the offer ratio does not appropriately reflect the value attributed to The Trust Company to the merged entity."
The Trust Company have stated the offer of 33 EQT shares for every 100 Trust Company shares is too low and does not reflect the relative earnings contribution of the two companies.
It said the EQT offer has been "opportunistically timed to exploit the recent weakness in The Trust Company's share price and does not reflect the longer-term trading price relativities of the two companies".
The statement noted that the offer was made prior to The Trust Company's FY13 results to the market, which exceeded expectations.
In results released on the ASX last week, The Trust Company reported that consolidated operating earnings before interest, tax, depreciation and amortisation (EBITDA) for the second half of the 2013 financial year reached $10.1 million, exceeding forecasts of October 2012 by more than 10 per cent.
Speaking to The Trust Company before Friday's rejection of the bid, EQT managing director Robin Burns told InvestorDaily the bid offered shareholders a significant premium to their share price.
"We think that - mainly for Trust Company shareholders - we're offering a significant premium to what their share price was trading at before the offer," Mr Burns said.
"That's to do with the value that EQT's better performance can bring with the facilities that are available to us."
However, The Trust Company interim chief executive Shailendra Singh said the offer did not provide a fair price and advised shareholders to wait until they have read the target statement before making a decision.
"What we have said is that the EQT offer materially undervalues The Trust Company and we advised our shareholders to not take any action until such time as they've read the target statement," he said.
The target statement said the board are currently "seeking to test whether an alternative offer that recognises the full value of The Trust Company can be put to shareholders".
