Toshiba CEO Nobuaki Kurumatani told Reuters in an interview that the Japanese conglomerate, which holds 52.4% of NuFlare Technology Inc, had no intention of accepting Hoya's sweeter bid or raising its own.
Optical products maker Hoya has offered 12,900 yen per NuFlare share or $1.4 billion - a rare unsolicited bid in Japan, topping Toshiba's offer of 11,900 yen for each share it does not own.
If rejected, it could put NuFlare in the uncomfortable position of having to explain to shareholders why it did not accept a higher offer.
Hoya has, however, also said it wants at least two-thirds of NuFlare, meaning Toshiba would need to sell part of its stake. Toshiba executives have said they are puzzled by Hoya's proposal, which cannot succeed without Toshiba's cooperation.
"It's a mysterious tender offer," said Kurumatani.
NuFlare has more than 50% of the world's market for electron beam mask writers, used to print patterns on semiconductor wafers. That is attractive to Hoya which makes mask blanks and see synergies that will help it expand its semiconductor-related business.
Japanese activist investor Yoshiaki Murakami also has a 6.2% stake in NuFlare.
Kurumatani said if Toshiba's bid fails, "it will just be the current status quo," he said. "This is not something we are troubled by."
"NuFlare cannot survive without Toshiba," he said, adding that Toshiba engineers have been heavily involved in developing NuFlare's next-generation mask writers. "We can unleash the value of NuFlare," he said. "It's not a matter of price."
Asked to comment on Kurumatani's remarks, a spokeswoman for Hoya said: "Hoya believes its offer is the best one for all three companies - Toshiba, Hoya and NuFlare."
Travis Lundy, an independent analyst who writes on the Smartkarma platform, said he thought NuFlare and Toshiba Machine Co Ltd, NuFlare's No.2 shareholder, could be exposed to shareholder lawsuits if Hoya's bid is rejected.
But Kurumatani said Toshiba's board, the majority of which are external directors, had signed off on Toshiba's offer price for NuFlare and bumping that up would harm its own shareholders' interests.
Toshiba's bid, which ends Dec. 25, is part of a 200 billion yen ($1.8 billion) plan to convert NuFlare and two other listed subsidiaries into wholly owned units.
If Toshiba's bid fails, Hoya's offer would begin in April and is due to run for a month.
By Makiko Yamazaki and Noriyuki Hirata