Schuler, based in Göppingen, said both its supervisory and management boards feel the offer fairly values the company and praised plans to leave its payroll and locations untouched post-acquisition. "In addition to evaluating the bid level, the management and supervisory boards also took into consideration the proposed continuation of Schuler's current business strategy," the company said.

Graz, Austria-based Andritz in May unveiled a €20 per share offer for Schuler to branch into automotive manufacturing equipment. The approach offers investors a 26.3% premium to the stock's closing price the day before the offer was announced. As part of the approach, Andritz bought a 38.5% stake from Schuler's founding family and an additional 25% on the market, giving it 63.5% of the company.

The suitor didn't set a minimum number of shares for the offer to be ruled successful. However, it could only integrate Schuler in its books if it holds 75% of the target, which would also simplify its control of Schuler. The offer runs through Aug. 13.

The Thursday recommendation goes against a letter reportedly sent to Schuler last week by Elliott. The fund, Paul Singer's $20 billion activist fund, bought 10% of Schuler last month and now wants the company to hold out for more cash. The fund said similar deals paid Ebitda multiples for expected 2012 earnings of 6, while the Andritz approach offers just 5.3.

The company's recommendation appears to have flushed out many of the holdouts hoping for a sweetened offer. Schuler shares slid €0.13 in afternoon Frankfurt trade to €20.20. Andritz shares gained €0.06 to €40.56 in Vienna.

Elliott is no stranger to companies in Europe's biggest economy. Last year it bought about 10% of Demag Cranes AG and then helped orchestrate the company's €936 million sale to U.S. rival Terex Corp. In May it bought just over 10% of German computer maker Medion AG, which is controlled by China's Lenovo Group Ltd. Lenovo bought just under 80% of the company as part of a public offer last year and Elliott may be hoping to negotiate a sweetened squeeze-out premium.

Andritz engineers and builds plants for producing power, making animal feed and separating liquids and solids. It hopes to speed into the automotive sector with the Schuler purchase.