The $205 per share price would mark a premium of more than 25 percent from Perrigo's last trade last week. After a temporary trading halt, the drugmaker's stock rose sharply following the announcement to trade at around $200 per share.
Perrigo told CNBC it received a proposal from Mylan and its board will meet to discuss it.
Mylan shares were up 14 percent on Wednesday. It said the potential deal could help drive synergies and expand operating margins.
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Perrigo, with a large and attractive portfolio of over-the-counter consumer products, infant formulas and a line of generic topical pharmaceutical medicines, has long been seen as a takeover target. Mylan has been at the center of deal speculation as one of its main rivals, Actavis, has swallowed upcompanies to expand beyond generic medicines, including a deal tobuy Botox maker Allergan.
— CNBC's Meg Tirrell and Reuters contributed to this report