Agrochemicals firm Syngenta has rejected a $45 billion takeover offer from Monsanto.
Syngenta said the offer undervalued the Swiss firm and did not fully take into account regulatory risks.
Sources had told Reuters that the two agricultural companies were working with investment banks on a takeover deal that would create an industry behemoth with combined sales of more than $31 billion.
But Syngenta said its board had unanimously rejected a 45% cash offer by Monsanto that would value Syngenta at 449 Swiss francs ($486.35) per share.
"The offer fundamentally undervalues Syngenta's prospects and underestimates the significant execution risks, including regulatory and public scrutiny at multiple levels in many countries," Syngenta said in a statement.
Syngenta shares rose 17% today after the bid approach was confirmed.
Swiss company Syngenta had been working with Goldman Sachs to assess the merits of a sale to the world's largest seeds company Monsanto, which is being advised by Morgan Stanley, the sources had earlier told Reuters.
Monsanto, which initially approached Syngenta last year, has long been interested in its Swiss rival and the potential to base itself in Switzerland and benefit from lower taxes, one of the sources told Reuters.
Following attempts by the US Treasury to clamp down on such moves, known as tax inversion, Monsanto may have to buy Syngenta in a cash rather than stock transaction and would be unable to redomicile in Switzerland, an industry source said.
Monsanto sees strong benefits from a takeover of Syngenta, which makes heavy research and development investments in crop technology to increase the average productivity of crops such as corn, soybeans, sugar cane and cereals.
Monsanto, meanwhile, is focused on conventional and biotech seeds and last year raised its R&D spending to $1.7 billion from $1.5 billion in 2013.
A deal would come as prospects for genetically modified (GM) crops are improving in the European Union after a change in its legislation unlocked a stalled approval process. Monsanto owns the only GM product approved for cultivation in the EU, a modified maize.
Despite the two companies' cultural affinity, a merger may be challenged by competition regulators, mainly in North America, where the two groups are already seen as market leaders in the seeds industry.
German chemicals company BASF and US petrochemicals group Dow Chemical could be among possible bidders for all or parts of Syngenta, one of the sources said.
He mentioned Chinese state-owned firm, China National Chemical Corp (ChemChina), as another possible buyer with strong appetite to bulk up its European presence, though Syngenta may be reluctant to cede control to an Asian rival.
Syngenta, which was formed in 2000 by the merger of Novartis Agribusiness and Zeneca Agrochemicals, also competes with Bayer CropScience and DuPont Pioneer.
