Mylan NV (MYL.O) rejected Teva Pharmaceutical Industries Ltd's (TEVA.TA) unsolicited $40 billion takeover offer on Monday, saying it was too low and calling Teva stock an "unacceptable" currency.
Teva, the world's biggest maker of generic drugs, last week offered $82 per share in cash and stock for smaller rival Mylan.
Mylan, which is pursuing its own takeover of Perrigo Co Plc (PRGO.N), had been expected to reject the offer after having indicated that such a combination would not be a good fit.
In response to the Mylan rejection, Teva said it was standing by its cash and stock offer.
Mylan shares fell 3.48 percent to $73.44 on Nasdaq, and Teva fell 2.3 percent to $62.91 on the New York Stock Exchange.
Mylan Executive Chairman Rob Coury said in a lengthy letter to Teva released on Monday that Mylan would not consider any discussions unless "the starting point" was "significantly in excess of $100 per share."
Wall Street analysts had said Mylan might be looking for $90 to $95 per share and an increased cash component.
Coury said in the letter, which described Teva's culture as "dysfunctional," that Teva's stock was an unacceptable currency because it had underperformed its peers, including Mylan, over the last three years.
"The Mylan board has no interest in considering an expression of interest that... requires Mylan shareholders to accept what we believe is low-quality and high-risk currency in the form of Teva shares," it said.
In addition, it said its customers and partners had voiced concerns about Teva and did not support the possible combination.
Mylan said it remained committed to its $31 billion offer for Perrigo, which has been rejected. Mylan plans to take the offer directly to Perrigo shareholders in what is set to be one of the most high-profile hostile takeover attempts of the year.
Mylan's pursuit of Perrigo, a major producer of over-the-counter drugs, is widely seen as an attempt to fend off Teva.
"While we are disappointed that Mylan has formally rejected our proposal, the Teva board and management team are fully committed to completing the combination of Teva and Mylan," Teva CEO Erez Vigodman said in a statement.
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