In mid-April the German Financial Markets Stabilisation Fund (SoFFin) said it would offer €1.39 ($1.82) per share, around 10 percent more than the minimum the government could offer (€1.26.)
Shareholders have until May 4 to accept the deal, which would allow the government intended to take full control of the bank at the cost of €290 million.
But Flowers said Thursday that the offer was not enough.
“J.C. Flowers is convinced that the HRE shares are worth more than €1.39,” he said in New York. “As long-term oriented investors, it is our wish to support the company into the future.”
The German Finance Ministry acknowledged Flowers' refusal on Thursday, but said it would not alter their plans to take over the company.
Berlin, which has already pumped €87 billion into the bank, is concerned that a collapse of HRE would prompt the sort of financial market chaos that followed the failure of US investment bank Lehman Brothers in September.
The government passed an emergency bank nationalisation law giving it the power to seize investors' share by force if necessary. The bank's nationalisation could come at the expense of US investor Christopher Flowers who heads a consortium owning almost 24 percent of the shares in HRE.