THE boards of Waterford Coop and Waterford Foods have unanimously rejected the £281 million takeover bid from Avonmore, but Avonmore can choose to return with a better offer.

Last night Avonmore said it was disappointed by the Waterford decisions but welcomed Waterford's support for the concept of merger or consolidation in the industry. Avonmore said it will consider the Waterford statement "in due course".

In a statement from Waterford after a day of meetings in Dungarvan, the boards said they could not recommend the offer from Avonmore to their 5,500 farmer members or to shareholders.

"The Avonmore proposal could not be endorsed by the boards of the society or the company as it does not reflect the underlying value of the Waterford business, its strategic positioning in key markets and the contribution it can make to any merged entity in the future."

While Avonmore's proposal has been rejected, the boards stated that "if Avonmore sees fit to make an equitable proposal it will, in the interest of all the stakeholders in Waterford, be considered by the boards of the society and the company".

The rejection was unanimous but it does not appear to be a final rejection of a merger with Avonmore. And the Waterford boards seem to accept that mergers are required within the industry. The boards said they agreed "with the concept of merger or industry consolidation to increase shareholder value and secure the best future for all its stake holders".

They added that "in this regard, operational scale and strategic positioning will be critical factors in any evaluations process". An offer from Avonmore "in this context" would be considered, the statement said. The Waterford boards thus appear to have invited Avonmore to come back with a better offer.

The board of Waterford Foods studied the offer as well as the clarifications received from Avonmore's financial advisers, IBI Corporate Finance, for three hours yesterday morning. Sources said the directors considered the proposals "unbalanced" and "inequitable".

The board meeting of 35 member coop board started at 3.30 p.m. and broke up just before 6.30 p.m.. Thirteen of the directors of the public company are on the coop board. Sources said the board members rejected the proposal as "inadequate" under a number of headings including the milk price, trading: issues, representation and other issues.

The coop owns 68 per cent of the publicly quoted company and for a merger to proceed, 75 per cent of the coop member who vote must approve the deal. An eight and a half hour meeting of the coop board on April 18th decided to seek clarification on almost all aspects of the offer.

The Kilkenny based Avonmore operation has offered to make milk price improvements worth an average of £4,000 per year to the Waterford farmers. The offer put a value of 117 1/2p on Waterford shares based on the one for two share exchange proposed by Avonmore.

While the news from Dungarvan was too late to influence share prices yesterday, Waterford shares closed 1p weaker at 89p and Avonmore shares were 3p down at 232p. A merger would create a £2.5 billion dairy and meat group.