The owner of electricals company Comet has rejected a £1.72 billion takeover approach from a private equity firm.
Kesa Electricals, which also owns retail chains Darty and BUT in France, said the offer of 325p a share "undervalues the company and its prospects".
The news of the bid sent shares in Kesa soaring, up 24.5 per cent immediately after the announcement.
A spokesman declined to identify its suitor.
Analysts said Apax Part-ners, Permira and Kohlberg Kravis Roberts were possible candidates as private equity firms with track records in the retail sector.
Kesa is the third largest electricals retailer in Europe, with 28,000 staff in nine countries. Comet is the second largest in the UK, with 250 stores and more than 10,000 employees.
Kesa has suffered from stiff competition in the UK and France in recent months, with like-for-like sales at Comet down two per cent over Christmas and a shift towards less profitable goods such as televisions from products with higher margins like fridges and washing machines.
The sales figures were easily outstripped by rival DSG International, which posted an eight per cent rise in sales at Dixons and three per cent at Currys over the festive period.
In the year to January 31 2005, Comet posted operating profits of £52 million on the b ack of sales worth £1.54 billion.
Across the whole of Kesa, turnover was £3.96 billion and pretax profits reached £193.7 million, although analysts in the City are forecasting that to fall to £148 million when the company announces its figures for last year.
The interest in Kesa also prompted shares in its rivals to rise as investors hoped for further bids in the sector.
DSG International, B&Q owner Kingfisher and Argos owner GUS were all up.
Kesa was formed in 2003 when Comet and a number of sister electrical companies in Europe demerged from Kingfisher.
It floated on the stock market in London in July 2003 with a value of £900 million.
The Kesa shares response signalled investors were hopeful of a higher offer and Investec Securities analyst Matthew McEachran said 325p a share was a reasonable offer but added that an improved one of 350p may be required to take control.
"325p certainly gets you in the ball park," he said. "But the share price seems to suspect a price of around 350p, and that could well be the knock-out blow."
But ING analyst Anne Critchlow was sceptical.
She said: "Our model suggests a bid is quite unlikely. From a cash point of view we couldn't really make it work at a figure significantly higher than the current share price."
Kesa said its board had unanimously rejected the approach.
"The board has concluded that the proposal undervalues the company and its prospects," it said.
In January, Kesa steered market forecasts for full-year profits lower for the second time in two months.
UK electricals retailers are struggling with a slowdown in consumer spending, while Kesa said its French furniture chain, BUT, was also suffering from intense competition. ..SUPL: