Mylan Laboratories'

(MYL) - Get Report

board of directors Monday once again rejected investor Carl Icahn's takeover offer while also questioning his intentions.

The company said it planned to pursue its planned acquisition of

King Pharmaceuticals

(KG)

, even as Wall Street analysts say the deal has a reduced chance of success thanks, in part, to the continued sniping between Mylan and Icahn as well as to the financial problems at King.

Icahn, who controls 9.8% of Mylan's stock and is its biggest shareholder, offered $20 a share for the rest of the drugmaker on Friday and lambasted its efforts to acquire King, calling it an "egregious mistake."

In a statement Monday, Milan Puskar, the chairman and co-founder of Mylan, responded at length to a letter that Icahn sent last week: "Mylan's board of directors has evaluated the letter sent to it by Carl Icahn. Mr. Icahn has a long history of self-serving actions, and we believe that his letter is just another self-serving publicity device, aimed at trying to intimidate our management and our board with inflammatory and inaccurate statements. These tactics will not succeed, and we urge shareholders not to rely on Mr. Icahn's statements as factual. We do not believe that Mr. Icahn's letter, by any means, constitutes a serious offer for the company, and our board has determined that discussions with Mr. Icahn are not in the best interests of Mylan."

Many analysts, who never liked the Mylan-King deal in the first place, say they believe Icahn doesn't want to own or run Mylan, but instead wants to make a profit on his shares, which he has been buying since July 26. That's the day Mylan announced its bid to buy King, offering 0.9 shares of Mylan stock for each share of King.

"Judging by his prior record, I don't think he's interested in buying Mylan," said Martin J. Sikora, editor of

Mergers & Acquisitions

magazine. "My own feeling is that he wants to put Mylan in play. Right now, Icahn is in the driver's seat; but where it goes next? I don't know."

Icahn's comments about and strategy for Mylan certainly don't sound like his game plan for TWA, which he acquired in 1985, Sikora said. "This sounds like a political election where we call each other names," Sikora said.

(Ironically, Icahn was seen as a "white knight" by TWA's unions who didn't want Frank Lorenzo, then CEO of Texas Air, to take control of TWA.)

Icahn has purchased Mylan stock for as little as $14.73 a share. The stock was trading at $18.51 on July 23, the last trading day before the proposed acquisition of King was announced.

Mylan's shares -- which rise each time Icahn says he is buying more Mylan stock or offering to buy more stock -- dropped Monday after Mylan criticized Icahn. The shares were down 42 cents, or 2.2%, to $18.46.

Icahn also told Mylan on Friday that he has had "informal discussions that lead us to believe that at least three synergistic buyers would also have an interest in acquiring Mylan, but only on a friendly basis." He didn't name the potential buyers. Previously, Icahn warned that he would run a slate of directors to oppose Mylan's directors if the company didn't abandon its efforts to acquire King.

The possible "usual suspects" mentioned among analysts these days as white-knight candidates for Mylan include

Teva Pharmaceutical Industries

(TEVA) - Get Report

, the world's largest independent generic drug company, and the Sandoz unit of

Novartis

(NVS) - Get Report

.

Icahn's Strategy

"Does Mr. Icahn really want to own Mylan?" asked Timothy Chiang, a pharmaceutical industry analyst for Natexis Bleichroeder, in a report to clients. "While he indicated that there could be multiple parties interested in purchasing Mylan in a 'friendly' fashion, we remain skeptical of a bid more than $20 occurring."

Although Icahn may believe Mylan has growth potential, Chiang said the company's generic drug business "is in decline and continues to face more competition." In addition, Mylan's generic pipeline exhibits "much uncertainty," said Chiang, who says the stock's fair value for the next 12 months is $19. (He doesn't own shares; his company doesn't have an investment banking relationship.)

Calling Icahn's $20 bid "very well-timed and executed," Chiang added that "it also appears to be motivated by Mr. Icahn's desire to profit handsomely." Given a choice between Teva and Sandoz, Chiang predicts Sandoz would be the more likely buyer for Mylan due to its desire to expand.

Another analyst who says Icahn is only in it for the money is Eric Sandler, president of Sandler & Co., an investment research firm in Boca Raton, Fla. Sandler has a buy rating on Mylan, and he told clients Monday that the stock could go to $24 or $26 in the long term. "We believe that Mylan ultimately ends up being sold to another generic or branded pharmaceutical company." That $20 offer from Icahn, which is filled with conditions, simply establishes a base price of Mylan, Sandler said. (Sandler doesn't own shares, nor does his firm have an investment banking relationship.)

That $20 offer "is an attempt to auction Mylan to the highest bidder," added Andrew Whittaker, the risk arbitrage analyst for Lehman Brothers. The offer "appears low as compared to standard deal premiums, which currently average in the mid-20%," he said in a Lehman Brothers report on Monday. (Mylan's closing price was $17.16 on Thursday, the day before Icahn's latest offer.)

"Clearly this announcement by Icahn decreases the likelihood that Mylan's acquisition of King will ultimately be approved by Mylan shareholders," said Whittaker, whose firm has an equal weight rating on Mylan. Neither Whittaker nor Lehman's drug analyst Richard B. Silver own shares in Mylan; their firm says its does and seeks to do business with companies mentioned in research reports.

Icahn has repeatedly attacked the proposed King deal as too expensive and too dilutive for Mylan shareholders, adding that King provides a poor strategic fit and a potential financial burden because its remains under investigation by the Department of Health and Human Services and the

Securities and Exchange Commission.

In a recent filing with the SEC, Icahn said, "We are not persuaded that there is no growth potential in the generic drug industry, and we believe that there are much better alternatives for Mylan than the acquisition of King."

Less than three weeks ago, Icahn said he had hired a consulting firm, A.T. Kearney, to evaluate the generic-drug industry, Mylan and King. In what now appears to be something of a hint of things to come, Icahn said the evaluation "will show there are many avenues" that "make more strategic sense" for Mylan than acquiring King.

Icahn has been joined in opposition of the King deal by UBS Global Asset Management, which owned 10.5 million shares, or 3.9%, of Mylan's stock as of June 30, according to the latest available data.

On Friday, Icahn said he would "stand by our $20-per-share proposal until such time that either Mylan shareholders vote the King deal down or you determine that you are legally free to put Mylan up for sale and grant due diligence."

Mylan's board on Monday said it is "committed to maintaining the company's independence" and emphasized that its "position with respect to the King acquisition remains unchanged."

Mylan's merger plan comes amid no small amount of uncertainty at King. Last week, King said it will need more time to file its third-quarter 10-Q statement, for which it already had sought a five-day postponement from the SEC. Last month, King said it had experienced a "high level of returns" due to a new inventory management system, a situation that has prompted King to warn investors that it might have to restate earnings. If King restates earnings, it would be a technical violation of the merger agreement with Mylan; but Mylan executives say they have the option to pursue the acquisition even if King must restate earnings.