Packaging and building materials maker Temple-Inland is rejecting a $3.3 billion unsolicited takeover bid from larger rival International Paper Co., saying the offer is too low and would face heavy regulatory scrutiny.

Memphis-based International Paper proposed a bid of $30.60 per share — or around $3.3 billion — for all outstanding shares of Austin, Texas-based Temple-Inland. That represents a premium of about 45 percent over Temple-Inland's closing stock price of $21.01 on Monday. Temple-Inland's shares have traded as high as $26.21 in the past year.

Temple-Inland said the bid undervalues its business. Temple-Inland said International Paper is acting now because Temple-Inland's building materials business has weakened in the economic downturn. Temple-Inland makes particleboard, gypsum board and other building materials.

Temple-Inland added that the deal would likely be scrutinized by federal anti-trust regulators. Temple-Inland currently controls around 12 percent of the North American market for corrugated packaging materials. A combined company would control around 40 percent of that market, Temple-Inland said.

"As the economic recovery continues and the benefits from our strategy continue to be realized, it is the stockholders of Temple-Inland who should gain from those anticipated benefits, not the stockholders of IP," Temple-Inland Chairman and CEO Doyle Simons said in a statement.

International Paper said it first proposed a merger verbally on May 17. On Saturday, Temple-Inland informed International Paper that its board had unanimously rejected the deal.

"We believe that our proposal offers clearly superior and compelling value to Temple-Inland's shareholders," International Paper Chairman and CEO John Faraci said in a statement. "Our proposal reflects the future business plans and economic outlook for Temple-Inland and for the sector, and incorporates a significant portion of the cost savings resulting from the merger of International Paper and Temple-Inland, while at the same time creating value for International Paper shareholders."

International Paper has more than 60,000 employees worldwide. It reported revenues of $25 billion in 2010. Temple-Inland has around 10,500 employees and reported revenues of $3.8 billion last year.

Temple-Inland shares rose 43 percent, or $9.04, to $30.05 in after-hours trading. International Paper shares rose $1.10, or 3.7 percent to $30.75.