STOCKHOLM (Reuters) - Sweden's Meda AB (>> Meda AB) said on Friday it had rejected a takeover approach by U.S. generic drugmaker Mylan Inc (>> Mylan Inc), scuppering a potential deal to create a combined company worth around $24 billion (14 billion pounds).

Meda said it had been contacted about an indicative proposal to combine the two businesses but its board had decided to reject the proposal.

"All continued discussions between Meda and Mylan have been terminated without further actions," it added in a brief statement.

The Swedish company, which makes specialty products, over-the-counter drugs and branded generics, has long been viewed as a takeover target and media reports said Mylan was exploring a bid at a significant premium.

Mylan has already said it wants to make a big acquisition this year and buying Meda was seen by investors as a logical move in a rapidly consolidating generics drug sector where economies of scale are important.

Shares in the U.S. firm, which closed down 2 percent at $49.86 (30.06 pounds) on Thursday, initially jumped more than 12 percent to over $55 in premarket dealings on hopes for an earning-boosting deal but slipped to under $53 after news of Meda's rebuff.

Meda's market valuation stood at 29.5 billion Swedish krona ($4.5 billion) at the end of trading on Thursday, while Mylan's market value was $18.5 billion. Trading in Meda's shares was suspended on Friday following reports of Mylan's interest.

Meda's net debt stood at 15 billion Swedish crowns ($2.3 billion) at the end of last year.

A year ago India's Sun Pharmaceutical Industries Ltd (>> Sun Pharmaceutical Industries Limited) held talks to buy Meda for between $5 billion and $6 billion in a bid to boost its generics business in developed markets, sources with knowledge of the matter said at the time.

Analysts in Mumbai said they doubted Sun would be interested in buying Meda now, since the talks last year foundered mainly on valuation and Meda's stock price has risen sharply since its $4 billion market valuation at the time.

"Sun has not done any expensive acquisitions. It doesn't look like a valuation number that Sun Pharma is generally comfortable with," said Aditya Khemka of Ambit Capital.

A Sun Pharma spokesman declined to comment.

MERGER WAVE

The generic drugs sector has seen a wave of merger deals recently as companies seek to revive growth in a tough market, having had a good run in the past decade by selling popular copycat versions of blockbuster medicines when they come off patent.

Times have got harder as the number of patent expirations dwindles, putting growth and profit margins under pressure, with mergers seen as one way to improve efficiencies.

Recent deals in the sector have led to savings of about 8 percent of sales, analysts estimate and Mylan said in February it was open to looking at makers of branded drugs and deals outside of the United States to add to future earnings.

The Pennsylvania-based firm had appointed advisers to help it put together a deal for Meda, people familiar with the matter said.

Last year Mylan bought Agila, a unit of India's Strides Arcolab Ltd (>> Strides Arcolab Limited), for $1.6 billion to expand its presence in the fast-growing generic injectable drugs market, and the U.S. company has said it is looking for further deals.

Chief Executive Heather Bresch told analysts in February the company planned a major transaction this year that would add to future earnings.

($1=6.5373 Swedish crowns)

(Additional reporting by Sven Nordenstam in Stockholm, Ben Hirschler in London, Zeba Siddiqui in Mumbai, and Caroline Humer and Soyoung Kim in New York; Editing by David Holmes and Greg Mahlich)

By Mia Shanley