Spanish electricity group Endesa has given a cool response to a surprise 29.1bn euro ($35bn; £19.9bn) takeover bid from German energy giant E.ON.
Spain wants to create a national energy champion
The company's board said it believed the offer did "not adequately reflect the true value of Endesa".
The comments came as Spain's government reportedly expressed concerns over the German firm's takeover move.
Meanwhile, the European Union warned Spain not to use its power of veto to block the German bid.
Spanish newspaper El Mundo's website said Prime Minister Jose Zapatero was "worried" about the bid.
Mr Zapatero and E.ON chief executive Wulf Bernotat held talks on Tuesday night about the takeover move, which was announced earlier in the day.
The Spanish government has already given its blessing to a 22.4bn euro hostile approach for Endesa from fellow Spanish energy group Gas Natural, although Endesa's management opposes the move.
Madrid is keen to see a national champion formed in the energy sector capable of taking on rivals on the world stage.
Gas Natural said its planned takeover of Endesa, announced in September last year, would create a company "with the capacity to compete at a European and world level and with the capacity to maintain its centre of decision-making in Spain".
Madrid could block E.ON's bid through its "golden share" in Endesa, though this goes against EU regulations.
A spokesman for the Spanish finance ministry said on Tuesday that such a move was "not very likely", but Mr Zapatero's reported concerns could determine whether the German bid is successful or not.
Mr Bernotat said E.ON's board had held a number of positive meetings with Endesa's senior managers ahead of the takeover bid announcement.
"The atmosphere was friendly, therefore we expect that the reaction from Endesa management also will be a friendly one," he said.
But analysts have raised doubts over the German bid, saying E.ON could be willing to pay too much for Endesa.