Bermuda investment manager Orbis Investment Management has lost its epic battle with the giant Berkshire Hathaway over the sale of Clayton Homes.

Orbis and a group of unhappy shareholders had been trying to halt the sale of Clayton Homes Inc., saying the sale was undervalued and would affect their investment in the maker of manufactured homes.

The group, which has been led by Bermuda's Orbis, made a last-ditch push to lobby for the defeat of a $1.7 billion sale to Warren Buffett's Berkshire Hathaway, after another prospective suitor dropped out of the bidding.

But on Wednesday Clayton officials said the deal was approved unofficially by 62 percent of the shares participating, or about 52 percent of the shares outstanding.

The $12.50 a share offer from the billionaire investor was the only one on the table for shareholders who met at Clayton headquarters in a Knoxville, Tennessee, suburb. Under the deal, Clayton Homes will operate as a Berkshire Hathaway subsidiary but under the same management.

Jim Clayton, Clayton Homes' founder and chairman, fielded questions from shareholders for about an hour, saying the vote represented "a very important decision for a lot of people".

Orbis Investment Management Ltd., which has led the effort to defeat the deal, held a 5.3 percent stake in Clayton.

William Gray, president of Orbis Investment Management Limited, said in a statement on Wednesday: "While it appears that management was able to muster sufficient votes to secure the approval of the merger with Berkshire Hathaway, a substantial majority of independent shareholders voted against the transaction.

"What is most telling is the extent to which independent shareholders were willing to fight to retain their interest in the future of Clayton Homes. Management will have to live with the part they played in forcing the independent shareholders to sell the company against their wishes at the bottom of the cycle."

He added that Warren Buffett had a great eye for value and that Clayton Homes is a prize acquisition.

"What is disappointing is that while championing the rights of independent shareholders and improved corporate governance, when in his interest he set terms for this merger agreement which encouraged management to adopt a process which falls well short of the standards he advocates."

Mr. Gray said Orbis was comfortable in the knowledge that it did all it could to protect the interests of its clients and fellow independent shareholders.

"We would also like to acknowledge the broad support that we received and take this opportunity to thank the many investors who publicly and privately supported our position and voted their respective shares against the transaction," Mr. Gray added.

The meeting was delayed earlier this month after Cerberus Capital Management unexpectedly expressed interest in buying Clayton. But Cerberus never made a formal bid and pulled out of the running late on Monday after analysing Clayton's confidential financial information.

The abrupt departure of Cerberus puts the matter back in the hands of Clayton shareholders, who had to approve the deal in order for it to be completed.

In recent weeks, a group of shareholders have lobbied other investors to defeat the transaction, contending that Clayton is worth more than the $12.50-a-share being offered by Berkshire.

Clayton, of Knoxville, Tennessee, urged its investors to vote for the Berkshire Hathaway deal, saying its independent directors determined it was in the best interests of the company and shareholders.

The situation has been one of the biggest shareholder efforts to defeat a friendly merger since investors of Hewlett-Packard Co. last year launched an unsuccessful campaign against the purchase of Compaq Computer Corp.

It is particularly unusual for shareholders of a target company to oppose a friendly deal without another suitor waiting in the wings. But Clayton's dissident investors say the company can weather the industry's current difficulties and it will be well-positioned when business improves.

When the deal was announced on April 1, the $12.50-a-share offer represented a 12 percent premium to where Clayton's stock had been trading. Shares of Clayton have traded well above the offer price on expectations that the deal might be defeated and the company would stay independent or another bidder would emerge.

Jim Clayton, a sharecropper's son who founded the company in 1966 and took it public in 1983, holds a 28 percent stake.

Clayton Homes makes, sells and finances manufactured homes, with 6,800 employees in 33 states.