The supervisory board of French public works and transport concessions group Eiffage on Monday rejected an unsolicited all-share offer by its biggest single shareholder, SacyrVallehermoso of Spain.
In an increasingly acrimonious cross-border tussle, Eiffage said Sacyr had broken French law and needed to offer a cash bid.
The new Eiffage board, meeting without the five members Sacyr had failed to get elected at an annual meeting of shareholders last week, said in a statement that any Sacyr bid needed to be worth at least 129.30 euros ($175.4) per share and would have to include a cash option.
The board said Sacyr would also need to make a bid for its APRR toll-road operating unit.
"The board of directors has unanimously considered that the offer filed by Sacyr Vallehermoso does not comply with the legislative and regulatory provisions that apply to such offers, and has unanimously rejected it," the board said in a statement.
Sacyr on April 19 offered 12 new shares for every five Eiffage shares, aiming to create Europe's third-biggest public works group behind France's Vinci and Hochtief of Germany. At Monday's closing prices, the Sacyr bid values Eiffage at 108.7 euros per share while Eiffage closed at 107.10 euros.
A spokesman for Sacyr in Madrid had no comment on the Eiffage statement and said the bid stood as it was.
Sacyr Chairman Luis del Rivero on Friday ruled out a cash bid and said Sacyr shares were better than cash.
The Eiffage board said it had mandated Chairman Jean-Francois Roverato and Chief Executive Benoit Heitz to take all actions necessary to ensure the legal and regulatory conditions for a public bid are fully respected after which the board would consider its interest.
The board added it was suing Sacyr for irregularities concerning the build-up of its stake and would seek compensation.
"Eiffage considers that Sacyr and other Spanish investors acted in concert and under French law they have to make a bid for all of the company at the highest transaction price paid by the concert," a spokeswoman for Eiffage said.
The French financial market regulator AMF has to rule on the validity of the Sacyr bid and has to decide whether it considers Sacyr acted in concert with others or not.
Eiffage owns 81.5% in Autoroutes Paris Rhin Rhone in conjunction with Macquarie Infrastructure of Australia after buying a majority stake from the French state in early 2006 following a privatization tender of three toll-road firms started in 2005. APRR on Monday said first-quarter sales rose 9.4% to 418.4 million euros.
Sacyr had been an unsuccessful bidder for a toll-road stake.
Eiffage and Macquarie made a buyout offer for all of APRR but due to some reticent investors the unit kept a listing and on Monday closed 1.47% up at 70.47 euros for a market capitalization of 7.8 billion euros. Eiffage itself has a market value of 9.97 billion euros.
On Friday, Eiffage said French real estate group Gecina held a stake of more than one percent. Gecina is controlled by Spain's Metrovacesa.
Other Spanish Eiffage investors are Rayet and Portival Eiffage is renowned for building the suspension bridge at the Millau viaduct, which spans the valley of the river Tarn.
Conceived by British architect Norman Foster, it is taller than the Eiffel Tower and longer than the Champs Elysees.
Eiffage has a history dating back to 1844, and a subsidiary built the Eiffel Tower in Paris that opened in 1889. The company also built the Sydney Opera House, the Louvre Pyramid and the world's tallest suspension bridge in southern France.