The offer was rejected "out of hand" by Terranova. "This approach very significantly undervalued the business and was rejected without further discussion," the company said.
Unigate called off a pounds 1.6bn bid for the whole of Hillsdown last year before it demerged its chilled foods and Fairview Homes divisions. Unigate was mainly interested in the chilled foods division, now called Terranova, which makes chilled dressed salads, sandwiches and poultry products under the Buxted chickens brand. It would fit well with Unigate's chilled foods operations, analysts said.
Unigate is unlikely to walk away and is now expected to sound out Terranova's major shareholders. Franklin Resources of the US is the largest with 19 per cent, followed by Phillips & Drew with 14 per cent and Prudential with 11 per cent. It has not ruled out a hostile bid.
Unigate's offer is at a large premium to the 75p Terranova's shares hit earlier this month. However, it would still be at a relatively low exit multiple of 12. It is thought Terranova would be looking for at least 170p.
Last week Terranova reported its maiden full-year results. Chief executive Terry Stannard repeated the company's commitment to independence. "Without any reference to speculation, we believe we have a super company with management energised by our independent status."
The results showed a fall in operating profits from pounds 27.3m to pounds 25.3m, and the company said trading conditions remained very competitive in Europe.
Unigate shares closed 3p lower at 410.5p yesterday.