Dana Corporation on Tuesday rejected a $US2.2 billion hostile bid from its smaller rival, ArvinMeritor, calling the offer financially inadequate and risky, Reuters reported.

The news agency noted that ArvinMeritor surprised the market two weeks ago with its unsolicited approach for Dana at $15 per share.

“This deal is highly speculative. This lacks strategic value,” Dana chairman and chief executive Joe Magliochetti told Reuters in an interview. His company rejected the bid shortly after the close of regular stock market trading, the report said.

Magliochetti told Reuters Dana’s recent restructuring programme would make the company more valuable to its shareholders than ArvinMeritor’s cash offer. At the end of 2001, Dana unveiled a revamp plan including a number of divestments, Reuters said, adding that, since then, its returns on invested capital has risen to 7%.

According to Reuters, Dana did not say categorically that it preferred to stay independent and said it had retained investment bank Goldman Sachs as an advisor, tapping a bank with a reputation on Wall Street of successfully defending companies faced with hostile bids.

Dana also told Reuters that ArvinMeritor’s bid would attract scrutiny from anti-trust officials since the two companies are the only substantial North American producers of axles, driveshafts and foundation brakes for medium- and heavy-duty trucks.

Dana also criticised its bidder for launching a deal without saying how it will finance it, Reuters added.

According to Reuters, ArvinMeritor slammed back by saying that all issues raised by Dana could be easily resolved.

When asked by Reuters about its financing plans, a company spokesman did not comment but a source familiar with the situation said ArvinMeritor would get financing ready shortly before payment time as it did not want to pay for unnecessary financing costs.