Steadfast is offering 41.5c cash a share for insurer Calliden, with shareholders also to receive a 5c a share special dividend.

The offer, via a scheme of arrangement, can be defeated if 25 per cent of the shares vote against it at a shareholder meeting in late November.

"The bid arguably undervalues the company," said Sebastian Evans, fund manager at Naos Asset Management. A long term holder of Calliden, it recently topped up its shareholding.

"This gives us a free option on the upside, if another offer comes along."

"The bid looks cheap and the offer discounts the significant franking credit balance," another large shareholder said. "As Steadfast has already announced the accretion to its EPS [if the bid succeeds], the market has factored that into Steadfast's share price.

"It looks like Steadfast must now complete the deal or else they have an effective earnings downgrade. Thus any counter bid will force Steadfast to raise its bid price."

At its December 31 balance date, Calliden had $26 million of franking credits in hand which will still be sizeable after paying the planned 5c a share special dividend and 1c interim payout which will chew an estimated half of this balance.

Since the Steadfast offer was disclosed, Calliden shares have regularly traded 0.5c above the imputed value of the offer, although usually with only small volumes traded at the higher price.

This occurred again on Friday when a small parcel was traded at 47c, slightly higher than the theoretical value of 46.5c.

Under a scheme of arrangement, the proposal could fail if more than 25 per cent of shares vote to oppose the deal. Calliden has a handful of shareholders with large stakes.

Australian Unity, for example, has a 13 per cent shareholding, with a range of other fund managers such as First Samuel, NAOS, Greencape and Challenger holding between 6 and 8 per cent. Long term holder Hunter Hall has sold down its 11 per cent stake.