It is a David and Goliath battle, with the small Bermuda firm Orbis fighting off the might of Warren Buffett over the $1.7 billion buyout of Clayton Homes.

But according to investment management firm Orbis' president William Gray, he is not in fact pitting himself against Buffett's Berkshire Hathaway, but instead he agrees wholeheartedly with the billionaire businessman.

"I don't see it as taking on Warren Buffett because in effect it is more that we agree with Warren Buffett and that we find ourselves at opposing purposes," said Mr. Gray yesterday. "We have been significant shareholders for a while because we felt that the company was worth significantly more than the price at which it was trading on the stock exchange. We understood why it was trading where it is, but we felt this would be reversed in time. And the fact that Warren Buffett chooses to bid for the company - in fact he said if you look at the markets you will find very few companies that are remotely interesting - shows that he agrees with us, that the company has fantastic prospects."

Mr. Gray is leading the battle cry of shareholders against the buyout proposal led by Berkshire Hathaway. Orbis, which owns five percent of Clayton Homes, a Knoxville Tennessee-based builder of modular homes has said the price offered for the company is not good enough - and has been joined steadily by other companies in their bid to block the buyout.

In April, Berkshire Hathaway announced a $12.50 or $1.7 billion bid for Clayton Homes. The transaction offers Clayton a 12 percent premium to its closing stock price a day before the bid. The stock closed last night on the New York Stock Exchange at $13.10

Shareholders are due to vote on the buyout on July 16 at a special meeting, but the battle will be tough as Clayton Homes' management owns 28 percent of the stock and are backing the proposal.

But Orbis and others believe that the management of the company have sold the company short and believe that the company is worth substantially more than the $12.50 per share Buffett's company is offering.

In an open letter to shareholders last week, Orbis said that improving market conditions, a $2.2 billion deal by a competitor and Buffett's own words should convince shareholders it is not a good time to sell the company.

This letter came four days after a Delaware court rejected Orbis' effort to stop the Clayton-Buffett deal on the grounds that Clayton held its board meetings in violation of Delaware law.

Speaking to The Royal Gazette, Mr. Gray said he believes that the company's stock would now be worth more than $15 a share had the bid not been on the table.

Mr. Gray said: "It is not in our client's interest to sell at the price he (Buffett) might want to buy it at."

This is the first time that Orbis, an investment management company based in the LP Gutteridge Building between Par-la-Ville and Bermudiana Road with a staff of 28 in Hamilton, has been in the spotlight over any shareholder issue - and they are not exactly enjoying the limelight.

Rather they feel it is their duty to speak out and get a fair deal and guard the investment they have made on behalf of their investors and clients.

"We much prefer letting our results speak for themselves. But in this instance this was a large holding and a very attractive investment for our clients and we felt it was incumbent on us to stand up and protect their interest in participating in the future of the company.

"If we were alone in this regard, we would be getting nowhere, but the fact that so many other shareholders, including some very highly regarded investment managers, have reached the same conclusion as us is the reason it is continuing to the day."

Mr. Gray went on to say that "by far" the majority of shareholders agreed with their findings.

"But of course in an action like this, what matters is not the number of shareholders, but the number of shares those particular owners own. The most important aspect of that is that management owns 28 percent themselves and they have signed an agreement with Berkshire Hathaway that they would vote in favour of the deal."

Orbis' voice has been joined by other investors who feel that Clayton Homes is being sold for under its value - and others are expected to follow in the next few days.

Yesterday, Schneider Capital Management, a large institutional investor, joined the move opposed to the buy-out and later in the day Proxy Voting Services recommended that Clayton Homes shareholders vote against the proposed acquisition.

PVS is an independent division of Institutional Shareholder Services that serves Taft-Hartley funds, public plan sponsors and their investment managers with comprehensive voting services.

It said in its report: "Based on the weak premium, the non-independent nature of Clayton's board, the failure of the company to disclose employment and compensation of Clayton officers after the acquisition, and the recent range of the company's stock price (as high as $19), we believe this merger is not in shareholders' best interests. As such, we oppose the merger."

These two institutional investors join not only Orbis in objecting to the buyout, but also Cliffwood Partners LLC, Alpine Associates, Ithaca Partners LP and Third Avenue Management.

"There continues to be a groundswell of support against this transaction,' said Hugh Gillespie of Orbis.

Asked if they have any chance of winning the vote when management owns such a large number of shares, Mr. Gray said: "We continue to try and focus on the intrinsic value of the business and relate that to the current price."

But he said that the real professionals in this battle were the arbitrage community in the US who trade in stock like this in the midst of a merger vote.

And he pointed out that the share price just before the interview was $12.90 - 40 cents over the bid price. "This indicates that they feel that either there is a good chance the deal does not go through and that the share price will rise somewhat, or that there is a small chance it does not go through and the share price will rise substantially."

He said they do simple calculations of the probability of it going through times $12.50 plus the probability of it not going through times whatever they believe it could be at the end, giving them an expected value.

And when asked if the share price going up would be in their favour, he said yes, because it would make shareholders sit up and take notice.

"Since June 2 the share has constantly traded above the offer price," added James Dorr, Director, General Counsel and Secretary of Orbis. "So there is a market for those shareholders who want to sell at $12.50 to get better than the current merger price."

He added that the risk/reward profile was such that it made the stock a good bet.

Mr. Buffett controls Omaha-based Berkshire Hathaway which makes its cash by investing in undervalued companies. Its holdings include National Indemnity Co, Geico Corp, Fruit of the Loom and Dairy Queen.

The shareholder vote is still slated to take place on July 16 at Clayton's Blount County headquarters