Kathmandu's board has unanimously rejected Briscoe Group's takeover offer - and is recommending shareholders do the same.
Briscoe Group is offering 20 cents a share in cash, plus five Briscoe shares for every nine Kathmandu shares held.
But Kathmandu's independent advisor, Grant Samuel, says the underlying value of the shares is between $2.10 and $2.41, which is well in excess of Briscoe's implied offer of $1.80 a share.
Kathmandu Chair David Kirk said Briscoe's offer was opportunistic, and followed an isolated period of internal and external challenges experienced by Kathmandu.
The outdoor clothing retailer has issued a set of forecasts indicating its full year net profit will be down 53 percent to $20 million in the 12 months ended in July, which is less than half what it was the year earlier.
Mr Kirk said the retailer's performance has turned around in the last three months of the financial year just ended, and expects the current financial year ending in July 2016 to reflect a much stronger financial result.
The company expects sales growth of 11 percent in the 2016 year, with a 43 percent increase in underlying profit to $48.2 million, compared with the $33.7 million it expects to make in the 2015 year, just ended.
Mr Kirk said Kathmandu has strategies in place to drive sales, with international expansion contributing to a better bottom line.
He said Briscoe's offer was inadequate and did not reflect the underlying value of the company.
Briscoe Group currently holds just under 20 percent of the outdoor clothing and equipment retailer.
Kathmandu's share price is up 2 cents this morning to $1.73, which is still well below Briscoe's offer.
Briscoe Group Managing Director Rod Duke said he is still digesting today's announcment by Kathmandu's board.