Glass maker Pilkington has rejected a takeover approach from its biggest shareholder on the grounds that it was too low.
Pilkington, which employs about 500 people at its automotive glass business in Birmingham, told Nippon Sheet Glass that its proposed offer of £1.97 billion fell "materially short of a price which the board is prepared to accept".
It came as the Merseyside glass maker posted a 22 per cent rise in first-half profits to £99 million despite tough market conditions and soaring energy costs.
Earlier this week, Pilkington and Japanese firm Nippon confirmed they were in preliminary discussions over a cash offer for the company.
Nippon owns nearly 20 per cent of Pilkington and it was thought it could generate savings from combining its UK subsidiary NGF Europe with the headquarters of Pilkington as they are both based in St Helens.
Pilkington said yesterday that the proposed offer of 150p a share was unacceptable. Its shares closed at 150.5p on Wednesday night and it remains to be seen whether Nippon will return with an improved proposal.
Analysts said there was no indication how Nippon would finance the takeover or what cost savings could be made.
"It's a huge deal for them, they shouldn't be paying 150 pence as far as I can see, but if earnings and returns don't matter, who knows?" said Ken Rumph of Merrill Lynch.
Pilkington said that a nine per cent increase in revenues to £1.3 billion was driven by its core businesses of supplying car and construction companies, boosting profits in the six months to September 30.
Pretax profits of £99 million compared with £81 million in the first half last year and were slightly ahead of City expectations of around £97 million.
Pilkington chairman Sir Nigel Rudd, who is thought to have stood to gain £3.5 million under Nippon's offer, said: "The group's results in the first six months of the year are in line with our previous indications, despite challenging market conditions and increases in energy costs." Profits in the building products business were up ten per cent to £69 million on the back of improved efficiency and a one per cent rise in sales.
Sir Nigel said this was achieved despite "intense competition" in the sector.
In the automotive business, sales increased 15 per cent to £630 million following several successful launches of vehicles fitted with Pilkington products.
Operating profits were up £13 million, or 27 per cent, to £61 million.
Sir Nigel said: "Although conditions in most of our markets remain challenging, we have continued confidence for the full financial year."
Shares in Pilkington have more than doubled in the last two years as rumours of a takeover swept the market.
French firm Saint-Gobain, which owns the Jewson building materials chain and is currently locked in a hostile bid battle for plasterboard maker BPB, has also been mentioned as a potential suitor.
Pilkington employs around 24,000 people and has sales and distribution operations in more than 130 countries.