Biotechnology companyGenentechrejected an offer by its majority shareholder, Roche Holding, to acquire the shares of Genentech it does not already own.
Genentech said the offer -- $89 a share, or a total of $43.7 billion -- "substantially undervalues the company."
But it said it would consider a proposal that "recognizes the value of the company and reflects the significant benefits that would accrue to Roche as a result of full ownership."
The Roche offer, announced last month, is for the 44 percent of Genentech it does not already own.
Genentech, based in South San Francisco, formed a special committee to review the proposal.
Eric Schmidt, an analyst at Cowen and Co, said of Genentech's response, "This is no surprise at all. People believe the company is worth more and that Roche can afford to pay more. The game of chess has begun."
Genentech's stand mirrors the response given recently by biotechnology company ImClone Systems to drugmaker Bristol-Myers Squibb . Bristol offered to acquire the 83 percent of ImClone it doesn't already own for $60 a share. ImClone said the offer was too low.
Dr. Charles Sanders, chairman of the special committee formed by Genentech to review the Roche proposal, said in a statement that the committee "is confident in the company's strong financial and clinical momentum and its uniquely productive R&D capabilities, which will continue to enhance shareholder value."
Genentech said the committee has approved the implementation of a broad-based employee retention program to address employee concerns about the Roche proposal.
Genentech shares rose 66 cents to $98.51 in early trading on the New York Stock Exchange. Roche shares were fractionally higher in Switzerland.