The board of Franco-German drug firm Aventis formally rejected a bid from rival French group Sanofi-Synthelabo.
Aventis' staff are worried about the "takeover virus"
It unanimously rejected the 46bn euro (£31bn;$58.9bn) hostile approach, which was initially made in late January but has only now come into effect.
Aventis said the bid was "clearly inadequate from a financial standpoint" and "entails important social risks with limited benefits".
This is a reference to possible job losses if the two companies merged.
The board urged shareholders not to tender their shares in the offer and said it had instructed management to examine alternatives with a "stronger industrial, social and financial rationale."
It also authorised Aventis's chairman to finalise a written defence document against Sanofi's bid, which it will file on Thursday with the AMF French stock market regulator.
A Sanofi-Aventis merger would form the world's third-biggest drug company.
Sanofi wants to buy Aventis partly to avoid becoming a target itself after a key shareholder pact between L'Oreal and Total expires in December, who together own 44% of Sanofi.
Aventis stockholders have in principle until 27 April to tender their shares in Sanofi's stock-and-cash offer
Hostile takeover attempts are rare in continental Europe.
Sanofi-Synthelabo may have been encouraged in its late January offer by signs of support from the French government for a "national champion" in the pharmaceutical market.
Sanofi's pipeline, the drugs it has in development, is thought in some circles to be stronger than its counterpart, justifying a valuation which is about the same as Aventis' despite the latter having twice the sales.