International Power has rejected a bid by GDF Suez to buy the remaining 30 percent stake it does not own for around £6bn, the company said Wednesday.
International Power agreed to merge certain divisions with GDF Suez last year, creating the world's second-largest electricity provider.
"The members of the Independent Committee have unanimously concluded that the indicative proposal of 390 pence per share undervalues IPR," the company said. "Accordingly GDFS has been notified that the Independent Committee is unable to accept the indicative proposal."
GDF Suez released a statement after the rejection, saying it will "consider its different options regarding International Power, including the possibility of withdrawing its proposed offer".
The Sunday Times reported this week that a major International Power shareholder, Invesco Perpetual, was seeking at least 400p per share for the 30 percent stake.
International Power shares rose 0.25 percent yesterday to close at 404p per share, within one pence of its 2012 high. The London-based company, which posted pre-tax earnings of €4.3bn on €16bn in sales, is valued at around £20.5bn.